<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended February 26, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to _______
Commission File Number 0-19402
VANS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 33-0272893
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
15700 Shoemaker Avenue
Santa Fe Springs, California 90670-5515
(Address of Principal Executive Offices) (Zip Code)
(562) 565-8267
(Registrant's Telephone Number, Including Area Code)
Not applicable
(Former Name, Former Address and Formal Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 13,698,609 shares
of Common Stock, $.001 par value, as of April 10, 2000.
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VANS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 26, 2000 (UNAUDITED) AND MAY 31, 1999
<TABLE>
<CAPTION>
FEBRUARY 26, MAY 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,679,821 $ 7,777,192
Accounts receivable, net of allowance for doubtful accounts of
$1,807,868 and $1,432,214 at February 26, 2000, and May 31, 1999,
respectively 47,227,439 30,056,150
Inventories 45,242,550 37,024,553
Deferred tax assets 1,624,925 1,378,456
Prepaid expenses 7,496,723 7,823,767
------------ -------------
Total current assets 110,271,458 84,060,118
Property, plant and equipment, net 24,589,148 15,809,950
Property held for lease 4,557,881 4,601,326
Excess of cost over the fair value of net assets acquired, net of
accumulated amortization of $36,670,762 and $35,695,857 at February
26, 2000 and May 31, 1999, respectively 23,736,551 23,126,700
Other assets 3,265,351 2,939,623
------------ -------------
Total Assets $166,420,389 $ 130,537,717
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 24,340,038 $ 9,184,836
Accounts payable 8,163,431 10,600,870
Accrued payroll and related expenses 4,388,085 2,132,446
Accrued interest 1,119,243 479,210
Restructuring costs 207,871 730,141
Income taxes payable 4,741,879 343,698
------------ -------------
Total current liabilities 42,960,547 23,471,201
------------ -------------
Deferred tax liabilities 1,789,605 2,090,536
Capital lease obligations 29,154 90,893
Long-term debt 13,453,906 8,712,129
------------ -------------
Total Liabilities 58,233,212 34,364,759
------------ -------------
Minority interest 1,145,797 1,021,754
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized,
1,500,000 shares designated as Series A Participating Preferred
Stock, none issued and outstanding -- --
Common stock, $.001 par value, 20,000,000 shares authorized,
13,683,609 and 13,238,567 shares issued and outstanding at
February 26, 2000, and May 31, 1999, respectively 13,686 13,235
Cumulative foreign translation adjustment (4,296) (37,774)
Additional paid-in capital 104,028,008 102,092,026
Accumulated surplus (accumulated deficit) 3,003,982 (6,916,283)
------------ -------------
Total Stockholders' Equity 107,041,380 95,151,204
------------ -------------
Total Liabilities and Stockholders' Equity $166,420,389 $ 130,537,717
============ =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
VANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
THIRTEEN WEEKS ENDED FEBRUARY 26, 2000 AND FEBRUARY 27,1999
(unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-------------------------------
FEBRUARY 26, FEBRUARY 27,
2000 1999
----------- -----------
<S> <C> <C>
Net sales............................ $67,756,524 $45,516,985
Cost of sales........................ 40,179,619 26,988,188
----------- -----------
Gross profit................... 27,576,905 18,528,797
Operating expenses:
Selling and distribution......... 16,832,911 11,801,047
Marketing, advertising and promotion 5,049,743 5,187,277
General and administrative....... 2,812,083 1,619,354
Restructure cost recoveries...... -- (393,477)
Provision for doubtful accounts.. 156,924 167,500
Amortization of intangibles...... 375,576 337,788
----------- -----------
Total operating expenses....... 25,227,237 18,719,489
----------- -----------
Earnings (loss) from operations 2,349,668 (190,692)
Interest income...................... (13,675) (41,318)
Interest and debt expense............ 756,892 517,199
Other (income) expense............... (1,065,006) (1,591,446)
------------ -----------
Earnings before taxes.......... 2,671,457 924,873
Income tax expense................... 908,295 332,954
Minority share of income (loss)...... 51,031 (43,793)
----------- -----------
Net earnings......................... 1,712,131 635,712
Other comprehensive expense, net of tax:
Foreign currency translation adjustments (19,465) (29,299)
----------- -----------
Comprehensive income................. $ 1,692,666 $ 606,413
=========== ===========
Earnings per share information:
Basic:
Weighted average shares.............. 13,659,936 13,307,388
Net earnings per share............... $ 0.13 $ 0.05
=========== ===========
Diluted:
Weighted average shares.............. 14,625,625 13,653,322
Net earnings per share............... $ 0.12 $ 0.05
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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VANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
THIRTY-NINE WEEKS ENDED FEBRUARY 26, 2000 AND FEBRUARY 27,1999
(unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
----------------------------------
FEBRUARY 26, FEBRUARY 27,
2000 1999
------------ ------------
<S> <C> <C>
Net sales................................... $207,730,081 $156,579,447
Cost of sales............................... 120,366,759 90,066,953
------------ ------------
Gross profit.......................... 87,363,322 66,512,494
Operating expenses:
Selling and distribution................ 46,188,764 32,767,639
Marketing, advertising and promotion.... 16,252,245 16,098,846
General and administrative.............. 8,224,620 6,279,620
Restructure cost recoveries............. -- (393,477)
Provision for doubtful accounts......... 503,143 395,501
Amortization of intangibles............. 1,046,168 948,098
------------ ------------
Total operating expenses.............. 72,214,940 56,096,227
------------ ------------
Earnings from operations.............. 15,148,382 10,416,267
Interest income............................. (96,952) (166,636)
Interest and debt expense................... 1,935,192 794,789
Other income................................ (3,511,627) (3,155,559)
------------- ------------
Earnings before taxes................. 16,821,769 12,943,673
Income tax expense.......................... 5,719,401 4,659,722
Minority share of income.................... 788,807 377,407
------------ ------------
Net Earnings................................ 10,313,561 7,906,544
Other comprehensive income (expense), net of tax:
Foreign currency translation adjustments 22,095 11,299
------------ ------------
Comprehensive income........................ $ 10,335,656 $ 7,917,843
============ ============
Earnings per share information:
Basic:
Weighted average shares..................... 13,561,273 13,307,446
Net earnings per share...................... $ 0.76 $ 0.59
============ =============
Diluted:
Weighted average shares..................... 14,368,894 13,640,473
Net earnings per share...................... $ 0.72 $ 0.58
============ =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
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VANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THIRTY-NINE WEEKS ENDED FEBRUARY 26, 2000 AND FEBRUARY 27,1999
(unaudited)
<TABLE>
<CAPTION>
FEBRUARY 26, FEBRUARY 27,
2000 1999
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings .................................................... $ 10,313,561 $ 7,906,544
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization ................................. 4,418,844 3,705,295
Restructure cost recoveries ................................... -- (393,477)
Net gain on sale of equipment ................................. 149,701 (49,358)
Minority share of income ...................................... 788,807 377,407
Provision for losses on accounts receivable and sales returns . 503,143 395,501
Changes in assets and liabilities, net of effects of business
acquisition
Accounts receivable ......................................... (17,674,433) (14,188,249)
Inventories ................................................. (8,206,228) (6,566,505)
Deferred income taxes ....................................... (547,400) (42,839)
Prepaid expenses ............................................ 540,673 (1,153,190)
Other assets ................................................ (1,004,598) (301,050)
Accounts payable ............................................ (2,525,927) (2,756,038)
Accrued payroll and related expenses ........................ 1,754,459 (713,708)
Restructuring costs ......................................... (522,270) (4,967,674)
Income taxes payable ........................................ 4,398,181 2,657,058
------------ ------------
Net cash used in operating activities .................... (7,613,487) (16,090,283)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ...................... (10,599,519) (4,386,106)
Investments in other companies, net of cash received ............ 52,193 (219,900)
Proceeds from sale of property, plant and equipment ............. 12,255 840,093
------------ ------------
Net cash used in investing activities ................... (10,535,071) (3,765,913)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term borrowings ............................. 14,697,824 6,252,492
Payments on capital lease obligations ........................... (165,933) (163,374)
Proceeds from long term debt .................................... 4,279,446 5,317,492
Consolidated subsidiary dividends paid to minority shareholders . (527,606) (413,548)
Proceeds from issuance of common stock .......................... 733,977 1,219,025
Payment for repurchase of common stock .......................... -- (3,959,793)
------------ ------------
Net cash provided by financing activities ................ 19,017,708 8,252,294
Effect of exchange rate changes on cash .................. 33,479 17,654
------------ ------------
Net increase (decrease) in cash and cash equivalents ..... 902,629 (11,586,248)
Cash, beginning of period ....................................... 7,777,192 16,779,528
------------ ------------
Cash, end of period ............................................. $ 8,679,821 $ 5,193,280
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION - AMOUNTS PAID FOR:
Interest .................................................... $ 995,015 $ 426,058
Income taxes ................................................ $ 1,639,670 $ 1,372,398
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Increase in investment in consolidated subsidiary
Fair value of net assets acquired ........................... $ 145,967 $ 121,181
Stock issued ................................................ $ 1,273,339 $ 926,342
Business Acquisition
Common stock issued for business acquisition .................. $ -- $ 1,999,380
Note payable issued for business acquisition .................. $ -- $ 1,483,479
Fair value of net liabilities assumed, excluding cash received. $ -- $ 1,144,044
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
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VANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements included herein are
unaudited and reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the results of the interim
periods presented. The results of operations for the current interim
periods are not necessarily indicative of results to be expected for the
current year.
Certain amounts in the prior period financial statements have been
reclassified to conform to the current period presentation.
2. Inventories are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 26, MAY 31,
2000 1999
----------- ------------
<S> <C> <C>
Work-in-process $ 213,720 $ 138,004
Finished goods 45,959,801 37,568,147
Less: valuation allowance (930,971) (681,598)
------------ ------------
$45,242,550 $ 37,024,553
=========== ============
</TABLE>
3. Basic earnings per share represents net earnings divided by the
weighted-average number of common shares outstanding for the period.
Diluted earnings per share represents net earnings divided by the
weighted-average number of shares outstanding, inclusive of the dilutive
impact of common stock equivalents. During the thirteen-week and
thirty-nine week periods ended February 26, 2000, and February 27, 1999,
the difference between the weighted average number of shares used in the
basic computation compared to that used in the diluted computation was due
to the dilutive impact of options to purchase common stock.
The reconciliations of basic to diluted weighted average shares are as
follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
--------------------------------- ---------------------------------
FEBRUARY 26, FEBRUARY 27, FEBRUARY 26, FEBRUARY 27,
2000 1999 2000 1999
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings $ 1,712,131 $ 635,712 $10,313,561 $ 7,906,544
=========== =========== =========== ===========
Weighted average shares
used in basic computation 13,659,936 13,307,388 13,561,273 13,307,446
Dilutive stock options 965,689 345,934 807,621 333,027
----------- ----------- ----------- -----------
Weighted average shares
used for dilutive computation 14,625,625 13,653,322 14,368,894 13,640,473
=========== =========== =========== ===========
</TABLE>
4. Income taxes for the interim periods were computed using the effective tax
rate estimated to be applicable for the full fiscal year, which is subject
to ongoing review and evaluation by management.
5. In Q4 Fiscal 1998, the Company provided $8,212,000 for restructuring
related to the closure of the Vista Facility and the restructuring of its
European operations. The estimated provision includes approximately
$2,949,000 for terminated international agreements and related costs,
$2,184,000 for estimated loss on sale of plant equipment, $1,433,000 in
terminated raw material contracts, $893,000 for involuntary termination
benefits for approximately 300 employees, and $753,000 for costs to close
the plant and prepare the site for a new tenant.
The following table outlines the beginning balance of, and expenditures and
adjustments to, the restructuring accrual during the third quarter of
Fiscal 2000 ("Q3 Fiscal 2000"):
<TABLE>
<CAPTION>
NOVEMBER 28, 1999 FEBRUARY 26, 2000
BALANCE CASH NON-CASH BALANCE
----------------- ---------- -------- -----------------
<S> <C> <C> <C> <C>
European Restructuring:
Termination of international $627,617 $ 419,746 $ -- $ 207,871
distributors
U.S.Restructuring:
Plant closure costs -- -- -- --
-------- ---------- -------- ---------
Total Restructuring Cost $627,617 $ 419,746 $ -- $ 207,871
======== ========== ======== =========
</TABLE>
6
<PAGE> 7
During Q3 Fiscal 2000, the Company incurred cash expenditures of $419,746
related to the termination of two of the Company's international distributors in
Europe. Such expenditures were funded out of operations. The Company did not
incur any cash expenditures related to the closure of the Vista Facility during
Q3 Fiscal 2000.
6. The Company's operations are classified into three reportable segments:
retail, wholesale and international. The Company evaluates performance
based on segment revenues and consolidated operating income. The Company's
reportable segments have distinct sales channels. Revenues for each
business segment are summarized as follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
--------------------------------- -------------------------------
FEBRUARY 26, FEBRUARY 27, FEBRUARY 26, FEBRUARY 27,
2000 1999 2000 1999
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Retail $20,693,000 $16,226,000 $ 57,738,000 $ 45,377,000
Wholesale 23,484,000 16,497,000 81,878,000 71,791,000
International 23,580,000 12,794,000 68,115,000 39,411,000
----------- ----------- ------------ ------------
$67,757,000 $45,517,000 $207,731,000 $156,579,000
=========== =========== ============ ============
</TABLE>
The Company does not have any individual customers representing more than 10% of
sales.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS GENERAL
The following discussion contains forward-looking statements about the
Company's revenues, earnings, spending, margins, orders, products, plans,
strategies and objectives that involve risk and uncertainties. Forward-looking
statements include any statement that may predict, forecast or imply future
results, and may contain words like "believe," "anticipate," "expect,"
"estimate," "project," or words similar to those. The Company's actual results
could differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in footnotes accompanying certain forward-looking statements, as well as those
discussed under the caption "Certain Considerations" on page 9 of the Company's
Annual Report on Form 10-K for the year ended May 31, 1999, as amended.
The Company is a leading branded lifestyle company which targets 10-24
year-old consumers through the sponsorship of Core Sports,(TM) such as
skateboarding, snowboarding, surfing and wakeboarding, and major entertainment
events and venues, such as the VANS Triple Crown(TM) Series, the VANS Warped
Tour,(TM) the VANS World Amateur Skateboarding Championships, the world's
largest VANS skateparks, and the VANS High Cascade Snowboard Camp,(TM) located
at the base of Mt. Hood. The Company was founded in 1966 in Southern California
as a domestic manufacturer of vulcanized canvas shoes. The Company is
incorporated in Delaware.
On November 20, 1996, the Company acquired 51% of the outstanding shares of
Global Accessories Limited, the Company's exclusive distributor for the United
Kingdom ("Global"), in a stock-for-stock transaction. During Fiscal 1998 and
1999, the Company acquired another 19% of the Global common shares in exchange
for Common Stock of the Company. In Q2 Fiscal 2000 the Company acquired an
additional 10% of the Global common shares in exchange for Company Common Stock.
The remaining 20% of the Global common shares are expected to be acquired by the
Company over the next two years. The results of Global are consolidated in the
Company's financial statements.
On July 21, 1998, the Company acquired all of the outstanding capital stock
of Switch Manufacturing, a California corporation ("Switch"), through a merger
(the "Switch Merger") with and into a wholly-owned subsidiary of the Company.
The Switch Merger was accounted for under the purchase method of accounting and,
accordingly, the purchase price was allocated to the net assets acquired based
on their fair values. Switch is the manufacturer of the Autolock(R) step-in boot
binding system (the "Switch Autolock System"), one of the leading snowboard boot
binding systems in the world. The Switch Merger consideration paid by the
Company consisted of: (i) 133,292 shares of the Company's Common Stock; (ii)
$2,000,000 principal amount of unsecured, non-interest bearing promissory notes
due and payable on July 20, 2001; and (iii) $12,000,000 principal amount of
unsecured, non-interest bearing promissory notes which are subject to potential
downward adjustment based on the financial performance of Switch during the
fiscal year ending May 31, 2001, and are also due and payable on July 20, 2001.
The operating results of Switch were consolidated in the Company's financial
statements from the date of acquisition.
On July 29, 1999, the Company acquired all of the outstanding capital stock
of High Cascade Snowboard Camp, Inc., an Oregon corporation ("High Cascade"),
and its sister company, Snozone Boarding and Video, Inc., an Oregon corporation,
through mergers of
7
<PAGE> 8
the two companies with and into a wholly-owned subsidiary of the Company. High
Cascade, located at the base of Mount Hood in Oregon, is the leading summer
snowboarding camp in the world. The consideration exchanged by the Company
primarily consisted of the issuance of 236,066 shares of the Company's Common
Stock. The results of the two companies are consolidated in the Company's
financial statements.
The Company has also established a subsidiary in Mexico, Vans
Latinoamericana (Mexico), S.A. de C.V. ("Vans Latinoamericana"), a subsidiary in
Argentina, Vans Argentina S.A. ("Vans Argentina"), a subsidiary in Brazil, Vans
Brazil S.A., ("Vans Brazil"), a subsidiary in Uruguay, Vans Uruguay, S.A. ("Vans
Uruguay"), a subsidiary in Hong Kong, Vans Far East Limited ("VFEL") through
which the Company conducts its foreign sales operations, and a subsidiary in
England, Vans Footwear Limited ("VFL"). The Company also co-owns two joint
venture subsidiaries, Van Pac LLC and VASH, LLC, with Pacific Sunwear of
California, Inc. and Sunglass Hut International, Inc. respectively. The results
of these subsidiaries are also consolidated in the Company's financial
statements.
RECENT RESTRUCTURINGS
During the fourth quarter of Fiscal 1998 ("Q4 Fiscal 1998"), the Company
restructured its U.S. operations and announced the closure of its last U.S.
manufacturing facility, located in Vista, California (the "Vista Facility"). The
closure of the Vista Facility was primarily due to a significant reduction in
orders for footwear produced at such Facility. Additionally, during Q4 Fiscal
1998, the Company commenced the restructuring of its European operations by
terminating certain distributor relationships and replacing them with sales
agents and a European-based operational structure designed to directly support
such agents (the "European Conversion").
The closure of the Vista Facility has resulted in the following benefits to
the Company: (i) decreased cost of goods for product produced at the Vista
Facility versus foreign-sourced product; (ii) the elimination of variances in
the manufacturing cost-per-unit which resulted from increases and decreases in
production levels at the Vista Facility; and (iii) increased management focus on
marketing and distribution rather than Facility management and cost accounting.
The European Conversion has enabled the Company to recognize the sales and
income previously recognized by the distributors, and the Company believes that
the establishment of a Company-owned European operational structure should
enable it to more efficiently coordinate its sales and marketing efforts and
control its distribution. The Company has experienced increased operating
expenses in connection with the European Conversion, as discussed below.
The Company incurred an infrequent restructuring charge of $8.2 million
(the "Restructuring Costs") and a write-down of domestic inventory of $9.4
million (the "Inventory Write-Down") in connection with these matters in Q4
Fiscal 1998. The majority of the costs for these restructurings were incurred in
Fiscal 1999. See Note 5 to Notes to the Company's Condensed Consolidated
Financial Statements. The Vista Facility was closed on August 6, 1998.
RESULTS OF OPERATIONS
QUARTERLY PERIOD ENDED FEBRUARY 26, 2000 ("Q3 FISCAL 2000") AS COMPARED TO
QUARTERLY PERIOD ENDED FEBRUARY 27, 1999 ("Q3 FISCAL 1999")
Net Sales
Net sales for Q3 Fiscal 2000 increased 48.9% to $67,757,000 from
$45,517,000 for Q3 Fiscal 1999. The sales increase was driven by increased sales
through each of the Company's sales channels, as discussed below.
Total U.S. sales, including sales through the Company's U.S. retail stores,
increased 35.0% to $44,177,000 for Q3 Fiscal 2000 from $32,723,000 for Q3 Fiscal
1999. Total international sales, including sales through the Company's five
European stores, increased 84.3% to $23,580,000 for Q3 Fiscal 2000, as compared
to $12,794,000 for Q3 Fiscal 1999.
The increase in total U.S. sales resulted from (i) a 42.4% increase in
domestic wholesale sales, and (ii) a 27.5% increase in sales through the
Company's U.S. retail stores. The increase in wholesale sales was primarily due
to increased penetration of existing accounts. The increase in U.S. retail store
sales was driven by sales from (i) a net 20 new stores versus a year ago, and
(ii) a 5.7% increase in comparable store sales (which excludes revenue from
skate sessions at the Company's skateparks). The increase in international sales
through VFEL was primarily due to a significant increase in sales to Germany and
France.
8
<PAGE> 9
Gross Profit
Gross profit increased 48.8% to $27,577,000 in Q3 Fiscal 2000 from
$18,529,000 in Q3 Fiscal 1999. The increase in gross profit was primarily due to
the increase in sales discussed above. As a percentage of net sales, gross
profit was even year-over-year at 40.7%.
Earnings from Operations
The Company had earnings from operations of $2,350,000 in Q3 Fiscal 2000
versus a loss of $191,000 in Q3 Fiscal 1999. Operating expenses in Q3 Fiscal
2000 increased 34.8% to $25,227,000 from $18,719,000 in Q3 Fiscal 1999, due to
the increases in selling and distribution and general and administrative
expenses discussed below. As a percentage of sales, operating expenses decreased
from 41.1% to 37.2% on a year-to-year basis.
Selling and distribution. Selling and distribution expenses increased 42.6%
to $16,833,000 in Q3 Fiscal 2000 from $11,801,000 in Q3 Fiscal 1999, primarily
due to: (i) operating costs related to the European Conversion, which was not
yet fully implemented in Q3 Fiscal 1999; (ii) increased personnel costs, rent
expense and other operating costs associated with the expansion of the Company's
retail division by the net addition of 22 new stores worldwide; and (iii)
increased sales commissions due to the increase in wholesale sales discussed
above.
Marketing, advertising and promotion. Marketing, advertising and promotion
expenses decreased 2.7% to $5,050,000 in Q3 Fiscal 2000 from $5,187,000 in Q3
Fiscal 1999. The net decrease in marketing, advertising and promotion expenses
was the result of increased third party sponsorship of the Company's major
entertainment events and venues, partially offset by increased costs associated
with new events included in the VANS Triple Crown(TM) Series.
General and administrative. General and administrative expenses increased
73.7% to $2,812,000 in Q3 Fiscal 2000 from $1,619,000 in Q3 Fiscal 1999,
primarily due to: (i) operating costs related to the European Conversion, which
was not yet fully implemented Q3 Fiscal 1999; (ii) increased labor, recruiting
and other employee-related expenses to support the Company's sales growth; (iii)
the inclusion of operating costs related to High Cascade which were not included
in the Q3 Fiscal 1999 Condensed Consolidated Financial Statements because High
Cascade was not yet owned by the Company; and (iv) increased legal expenses
related to the Company's ongoing worldwide efforts to protect and preserve its
intellectual property rights.
Provision for doubtful accounts. The amount that was provided for bad debt
expense in Q3 Fiscal 2000 decreased to $157,000 from $167,500 in Q3 Fiscal 1999,
primarily due to improvements in the management of past due accounts.
Amortization of intangibles. Amortization of intangibles increased to
$376,000 for Q3 Fiscal 2000 from $338,000 in Q3 Fiscal 1999, primarily due to
the increase in goodwill related to the acquisition of an additional 10% of
Global's common shares. See "--General."
Interest Income
Interest income declined to $14,000 in Q3 Fiscal 2000 versus $41,000 in Q3
Fiscal 1999 due to increased utilization of the Company's cash to fund its sales
growth. The Company had no investment accounts at February 26, 2000.
Interest and Debt Expense
Interest and debt expense increased to $757,000 for Q3 Fiscal 2000 from
$517,000 in Q3 Fiscal 1999, primarily due to increased borrowings under the
Company's credit facility to support its sales growth. See "--Liquidity and
Capital Resources, Borrowings."
Other Income
Other income primarily consists of royalty payments from the licensing of
the Company's trademarks to its distributor for Japan. Other income decreased to
$1,065,000 for Q3 Fiscal 2000 from $1,591,000 for Q3 Fiscal 1999, primarily due
to decreases in royalties received from such distributor.
9
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Income Tax Expense
Income tax expense increased to $908,000 in Q3 Fiscal 2000 from $333,000 in
Q3 Fiscal 1999 as a result of the increase in earnings discussed above. The
effective tax rate decreased from 36.0% in Q3 Fiscal 1999 to 34.0% in Q3 Fiscal
2000 primarily due to the tax benefit derived from the operation of VFEL.
Minority Share of Income
The Company had a minority share of income of $51,000 in Q3 Fiscal 2000
versus a loss of $44,000 for Q3 Fiscal 1999, primarily due the addition of the
Van Pac LLC joint venture, which did not exist in the same period of the prior
year, and increased earnings of Vans Latinoamericana. See "--General."
THIRTY-NINE WEEK PERIOD ENDED FEBRUARY 26, 2000 ("FISCAL 2000 NINE MONTHS") AS
COMPARED TO THE THIRTY-NINE WEEK PERIOD ENDED FEBRUARY 27, 1999 ("FISCAL 1999
NINE MONTHS")
Net Sales
Net Sales for the Fiscal 2000 Nine Months increased 32.7% to $207,731,000,
compared to $156,579,000 for the same period in Fiscal 1999. The sales increase
was driven by increased sales through all of the Company's sales channels, as
discussed below.
Total U.S. sales, including sales through the Company's U.S. retail stores,
increased 19.2% to $139,616,000 for the Fiscal 2000 Nine Months from
$117,168,000 for the same period a year ago. Total international sales increased
72.8% to $68,115,000 for the Fiscal 2000 Nine Months, as compared to $39,411,000
for the same period a year ago.
The increase in total U.S. sales resulted from (i) a 14.1% increase in
domestic wholesale sales as the Company increased penetration of existing
accounts, and (ii) a 27.2% increase in sales through the Company's U.S. retail
stores. The increase in U.S. retail store sales was driven by sales from a net
20 new stores versus a year ago, and an 8.4% increase in comparable store sales.
The increase in international sales through VFEL was primarily due to a $19.0
million increase in sales in Europe in connection with the European Conversion
and increased sales to Pacific Rim countries (primarily Japan), Central and
South American countries, and Canada.
Gross Profit
Gross profit increased 31.3% to $87,363,000 in the Fiscal 2000 Nine Months
from $66,512,000 in the same period of Fiscal 1999. As a percentage of net
sales, gross profit was essentially even year-over-year.
Earnings From Operations
Earnings from operations increased 45.4% to $15,148,000 in the Fiscal 2000
Nine Months from $10,416,000 in the same period of Fiscal 1999. Operating
expenses in the Fiscal 2000 Nine Months increased 28.7% to $72,215,000 from
$56,096,000 in the same period a year ago, primarily due to the increases in
selling and distribution and general and administrative expenses discussed
below. As a percentage of sales, operating expenses decreased from 35.8% to
34.8% on a year-to-year basis as a result of the Company's ability to leverage
its existing infrastructure to support the increase in sales.
Selling and distribution. Selling and distribution expenses increased 41.0%
to $46,189,000 in the Fiscal 2000 Nine Months from $32,768,000 in the same
period a year ago, primarily due to: (i) increased personnel costs, rent expense
and other operating costs associated with the expansion of the Company's retail
division by the net addition of 22 new stores worldwide; (ii) operating expenses
related to the European Conversion, which was not yet fully implemented in the
Fiscal 1999 Nine Months; and (iii) costs required to support the Company's U.S.
sales growth.
Marketing, advertising and promotion. Marketing, advertising and promotion
expenses increased slightly to $16,252,000 in the Fiscal 2000 Nine Months from
$16,099,000 in the same period a year ago, primarily due to: (i) increased
direct advertising and
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<PAGE> 11
promotional expense in Europe resulting from the European Conversion; (ii)
higher print and television advertising expenditures related to the
back-to-school selling season; and (iii) increased costs associated with new
events included in the VANS Triple Crown(TM) Series, partially offset by
increased third party sponsorship of the Series.
General and administrative. General and administrative expenses increased
31.0% to $8,225,000 in the Fiscal 2000 Nine Months from $6,280,000 in the same
period a year ago, primarily due to: (i) operating costs related to the European
Conversion, which was not yet fully implemented in the Fiscal 1999 Nine Months;
(ii) increased labor, recruiting and other employee-related expenses to support
the Company's sales growth; (iii) increased legal expenses related to the
Company's ongoing worldwide efforts to protect and preserve its intellectual
property rights; and (iv) the inclusion of operating costs related to High
Cascade which were not included in the Fiscal 1999 Nine Months because High
Cascade was not yet owned by the Company.
Provision for doubtful accounts. The amount that was provided for bad debt
expense in the Fiscal 2000 Nine Months increased to $503,000 from $396,000 in
the same period a year ago due to an increase in the general allowance for
doubtful accounts to correspond to the increase in accounts receivable which
resulted from higher sales.
Amortization of intangibles. Amortization of intangibles increased to
$1,046,000 for the Fiscal 2000 Nine Months from $948,000 for the same period a
year ago, primarily due to the increase in goodwill associated with the Switch
Merger and the acquisition of an additional 10% of Global's common shares. See
"--General."
Interest Income
Interest income decreased to $97,000 during the Fiscal 2000 Nine Months
from $167,000 in the same period of the prior year because of the Company's
increased utilization of cash to fund its sales growth. The Company had no
investment accounts at February 26, 2000.
Interest And Debt Expense
Interest and debt expense increased to $1,935,000 for the Fiscal 2000 Nine
Months from $795,000 in the same period a year ago for the same reasons
discussed under the caption "--Interest and Debt Expense" for Q3 Fiscal 2000.
Other Income
Other income increased 11.3% to $3,512,000 for the Fiscal 2000 Nine Months
from $3,156,000 for the same period a year ago, primarily due to an increase in
royalty income from the Company's distributor for Japan.
Income Tax Expense
Income tax expense increased to $5,719,000 in the Fiscal 2000 Nine Months
from $4,660,000 in the same period in Fiscal 1999 as a result of the higher
earnings discussed above. The effective tax rate decreased from 36.0% in the
Fiscal 1999 Nine Months to 34.0% in the Fiscal 2000 Nine Months for the same
reasons discussed under the caption "--Income Tax Expense" for Q3 Fiscal 2000.
Minority Share Of Income
Minority share of income increased to $789,000 for the Fiscal 2000 Nine
Months from $377,000 for the same period a year ago, primarily due to: (i)
increased earnings of Vans Latinoamericana; (ii) increased earnings of Global,
partially offset by the decrease in the minority ownership of Global; and (iii)
the addition of the Van Pac LLC joint venture which did not exist in the same
period of the prior year. See "--General."
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The Company finances its operations with a combination of cash flows from
operations and borrowings under a credit facility. See "--Borrowings" below.
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The Company experienced an outflow of cash from operating activities of
$7,613,000 during the Fiscal 2000 Nine Months, compared to an outflow of
$16,090,000 for the Fiscal 1999 Nine Months. Cash used by operations for the
Fiscal 2000 Nine Months primarily resulted from: (i) an increase in net accounts
receivable to $47,227,000 at February 26, 2000, from $30,056,000 at May 31,
1999, as described below; (ii) an increase in net inventory to $45,243,000 at
February 26, 2000, from $37,025,000 at May 31, 1999, as described below; (iii)
an increase in other assets; and (iv) a decrease in accounts payable. Cash
outflows from operations for the Fiscal 2000 Nine Months were partially offset
by the Company's earnings, the add-back for depreciation and amortization, and
the increase in income taxes payable and accrued payroll and related expenses.
Cash outflows from operations in the Fiscal 1999 Nine Months primarily resulted
from increases in accounts receivable and inventories and a decrease in the
Restructuring Costs accrual.
The Company had a net cash outflow from investing activities of $10,535,000
in the Fiscal 2000 Nine Months, compared to a net cash outflow of $3,766,000 in
the Fiscal 1999 Nine Months. The Fiscal 2000 Nine Months outflows were primarily
due to capital expenditures related to new retail store openings and skateparks.
Cash used in investing activities for the Fiscal 1999 Nine Months was primarily
related to new retail store openings, tenant improvements at the Company's
corporate offices in Santa Fe Springs, California, and investments in other
companies, offset by proceeds from the sale of assets in connection with the
closing of the Vista Facility.
The Company had a net cash inflow from financing activities of $19,018,000
for the Fiscal 2000 Nine Months, compared to a net cash inflow of $8,252,000 for
the Fiscal 1999 Nine Months, primarily due to short-term borrowings under the
Company's credit facility and long-term debt incurred by the Company and the
Company's South American subsidiaries. See "--Borrowings" below. Cash provided
by financing activities in the Fiscal 1999 Nine Months was related to proceeds
from short-term borrowings under the Company's former bank revolving line of
credit, and proceeds from long-term debt incurred by Vans Latinoamericana,
partially offset by the repurchase of $3,960,000 of common stock pursuant to the
Company's stock repurchase program.
Accounts receivable, net of allowance for doubtful accounts, increased from
$30,056,000 at May 31, 1999, to $47,227,000 at February 26, 2000, primarily due
to: (i) an increase in the Company's domestic accounts receivable due to the
increase in sales discussed above; and (ii) the inclusion of accounts receivable
for sales in Europe due to the European Conversion, which was not yet fully
implemented in the Fiscal 1999 Nine Months. Inventories increased to $45,243,000
at February 26, 2000, from $37,025,000 at May 31, 1999, primarily due to: (i)
increased inventory held at the Company's distribution center in Holland
(established in connection with the European Conversion); (ii) increased
inventory held by the Company's South American subsidiaries; and (iii) an
increased number of finished goods held for sale at the Company's retail stores
to support the net addition of 22 new stores worldwide and increased sales.
Borrowings
In July 1999, the Company obtained a $63.5 million unsecured credit
facility (the "Credit Facility") pursuant to a credit agreement (the "Credit
Agreement") with several lenders (the "Lenders"). The Credit Facility permits
the Company to utilize the funds thereof for general corporate purposes, capital
expenditures, acquisitions and stock repurchases.
Of the $63.5 million amount of the Credit Facility, $53.0 million is in the
form of an unsecured revolving line of credit (the "Revolver"), and $10.5
million is in the form of an unsecured term loan (the "Term Loan"). The Revolver
expires on October 31, 2002. The Company has the option to pay interest on
Revolver advances at a rate equal to either (i) LIBOR, or (ii) a base rate plus
a margin which will be based on the Company's ratio of "Funded Debt" to
"EBITDA," each as defined in the Credit Agreement.
Of the $10.5 million Term Loan: (i) approximately $5.0 million was
disbursed at the closing of the Credit Facility to replace a portion of the
Company's former credit facility used for the Company's stock repurchase
program, which was completed in Fiscal 1999; (ii) approximately $3.0 million was
disbursed in Q2 Fiscal 2000 for capital expenditures; and (iii) the remaining
portion must be disbursed on or before January 31, 2001, or it will expire. The
Term Loan expires May 31, 2004, and the principal thereof is payable in 14
quarterly installments beginning February 28, 2001, and ending May 31, 2004. The
Company has the option to pay interest on the Term Loan at LIBOR for advances of
one, two, three or six months, or a base rate for U.S. dollar advances. The
Company has reached an agreement-in-principle with the Lenders to increase the
Credit Facility to $78.0 million, but such agreement is subject to the execution
and delivery of definitive documentation.
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Under the Credit Agreement, the Company must maintain certain financial
covenants and is prohibited from engaging in certain transactions or taking
certain corporate actions, such as the payment of dividends, without the consent
of the Lenders. At February 26, 2000, the Company had drawn down and/or borrowed
$30,534,000 under the Credit Facility and was in compliance with all financial
and other convenants under the Credit Agreement.
Vans Latinoamericana and Vans Argentina maintain notes payable to Tavistock
Holdings A.G., a 49.99% owner of such companies ("Tavistock"). The loans by
Tavistock were made pursuant to a shareholders' agreement requiring Tavistock to
provide operating capital, on an as-needed basis, in the form of loans to Vans
Latinoamericana and Vans Argentina. At February 26, 2000, the aggregate
outstanding balance under the notes was $3,609,000.
Current Cash Position
The Company's cash position was $8,680,000 at February 26, 2000, compared
to $7,777,000 at May 31, 1999. The Company believes that cash generated from
operations, coupled with the Credit Facility, should be sufficient to meet its
cash requirements for the next 12 months.*
Capital Resources
As of February 26, 2000, the Company's material commitments for capital
expenditures were primarily related to the opening and remodeling of retail
stores and the opening of skateparks. In the remainder of Fiscal 2000, the
Company plans to open approximately two new factory outlet retail stores, three
full-price stores, and remodel five existing stores. The Company estimates the
aggregate cost of all of these new stores and remodels to be between $1.5
million and $2.5 million.
The Company currently intends to open two additional skateparks in Fiscal
2000 and estimates the aggregate cost of its portion of these projects to be
approximately $500,000, since the landlords for these skateparks have agreed to
pay substantially all of the capital costs associated with the construction of
the parks.
The Company intends to utilize cash generated from operations and funds
drawn down and/or borrowed under the Credit Facility to fulfill its capital
expenditure requirements for the balance of Fiscal 2000.
Recent Accounting Pronouncements
In June 1998, the FASB issued FAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." FAS No. 133 modifies the accounting for
derivative and hedging activities and is effective for fiscal years beginning
after June 15, 2000. Since the Company and its subsidiaries do not presently
engage in significant hedging activities or invest in other derivatives, FAS No.
133 does not currently impact the Company's financial position or results of
operations.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP 98-l"), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The Company adopted
SOP 98-1 effective June 1, 1999. The adoption of SOP 98-1 required the Company
to modify its method of accounting for software, however, it did not have a
significant impact on the Company's financial position or results of operations.
- --------
* Note: This is a forward-looking statement. The Company's actual cash
requirements could differ materially. Important factors that could cause the
Company's need for additional capital to change include: (i) the Company's rate
of growth; (ii) the number of new VANS Triple Crown(TM) stores the Company
decides to open; (iii) the number of new skateparks the Company decides to open
which must be financed in whole, or in part, by the Company; (iv) the Company's
product mix between footwear and snowboard boots; (v) the Company's ability to
effectively manage its inventory levels; (vi) timing differences in payment for
the Company's foreign-sourced product; (vii) the increased utilization of
letters of credit for purchases of foreign-sourced product; and (viii) timing
differences in payment for product which is sourced from countries which have
longer shipping lead times, such as China.
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Seasonality
The Company's business is seasonal, with the largest percentage of net
income, U.S. sales, and all revenues generated from High Cascade realized in the
first Fiscal quarter (June through August), the "back to school" selling months.
As the Company increases sales to Europe due to the European Conversion, the
Company is recognizing more of such sales in the first Fiscal quarter due to
seasonal demand for product in Europe. In addition, because snowboarding is a
winter sport, sales of the Company's snowboard boots, and the Switch Autolock(R)
System, have historically been strongest in the first and second Fiscal
quarters. Such sales are now being recognized earlier in the first Fiscal
quarter since industry retailers are demanding earlier shipments of product.
In addition to seasonal fluctuations, the Company's operating results
fluctuate quarter-to-quarter as a result of the timing of holidays, weather,
timing of shipments, product mix, cost of materials and the mix between
wholesale and retail channels. Because of such fluctuations, the results of
operations of any quarter are not necessarily indicative of the results that may
be achieved for a full Fiscal year or any future quarter. In addition, there can
be no assurance that the Company's future results will be consistent with past
results or the projections of securities analysts.
Year 2000 Compliance Update
As of the date of this report, the Company has not experienced any material
Year 2000-related problems with any of its systems and has not received any
reports of such problems from any of its sales agents, distributors, customers,
landlords, financial partners, or third-party vendors.
Euro Conversion
On January 1, 1999, 11 of the 15 member countries of the European Union
established a fixed conversion rate between their existing sovereign currencies
and the Euro, and adopted the Euro as their common legal currency on that date
(the "Euro Conversion"). Existing currencies are scheduled to remain legal
tender in the participating countries until January 1, 2002. During the
transition period, parties may pay for goods and services using either the Euro
or the existing currency, but retailers are not required to accept the Euro as
payment. Since the Company primarily does business in U.S. dollars, it is
currently not anticipated that the Euro Conversion will have a material adverse
impact on its business or financial condition.* The Company is aware that the
information systems for its five European stores are not currently able to
recognize the Euro Conversion, however, since three of the Company's European
stores are located in the United Kingdom, which is not currently participating
in the Euro Conversion, and the Spain and Austria stores may continue to accept
local currencies until 2002, the Company does not expect its current overall
European store operations to be materially adversely impacted by the Euro
Conversion in the near future. The Company has confirmed that the information
systems utilized by its European sales agents will recognize the Euro
Conversion, and all of its European distributors have represented to the Company
that their systems will do the same.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The Company's exposure to market risk associated with changes in interest
rates relates primarily to its debt obligations. The Revolver bears interest at
a rate equal to either (i) LIBOR, or (ii) a base rate plus a margin which will
be based on the Company's rate of "Funded Debt" to "EBITDA," each as defined in
the Credit Agreement. See Item 2 "Management's Discussion and Analysis of
Financial Condition and Results of Operations --Liquidity and Capital
Resources." The Company does not use derivative financial instruments to hedge
its interest rate risks.
- ----------
* Note: This is a forward-looking statement regarding the currencies in which
the Company does business. The Company's actual results regarding the Euro
Conversion could differ materially if the Company begins to accept currencies
other than the U.S. dollar.
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Foreign Currency Risk
The Company operates its business and sells its products in a number of
countries throughout the world and, as a result, is exposed to movements on
foreign currency exchange rates. Although the Company has most of its products
manufactured outside of the United States on a per order basis, these purchases
are made in U.S. dollars. The major foreign currency exposures involve Japan and
Europe. In order to protect against the volatility associated with earnings
currency translations of foreign subsidiaries and royalty income from sources
outside the United States, the Company may, from time to time, utilize forward
foreign exchange contracts and/or foreign currency options with durations of
generally from three to twelve months. As of February 26, 2000, the Company had
no outstanding foreign exchange forward contracts.
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PART II
OTHER INFORMATION
ITEM 3. LEGAL PROCEEDINGS
Mark A. Raines; Gregory A. Deeney; Preston Binding Company vs. Switch
Manufacturing (Civil Action No. C96-2648-DLJ, District Court of Northern
California). During Q3 Fiscal 2000, the parties settled and dismissed all claims
and counterclaims in this matter with prejudice and without any liability to any
party.
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Employment Agreement of Gary H. Schoenfeld, dated as of August 16,
1999, superseding previous agreement
10.2 Employment Agreement of Charles A. Ponthier, dated January 20, 2000
10.3 Employment Agreement of Mark Smith, dated January 20, 2000
27 Financial Data Schedule
(b) Reports on 8-K.
The Company did not file any reports on Form 8-K during the quarterly period
ended February 26, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VANS, INC.
(Registrant)
Date: April 11, 2000 By: /s/ Gary H. Schoenfeld
--------------------------------------------
GARY H. SCHOENFELD
President and Chief Executive Officer
Date: April 11, 2000 By: /s/ Kyle B. Wescoat
--------------------------------------------
KYLE B. WESCOAT
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
EXHIBITS
--------
10.1 Employment Agreement of Gary H. Schoenfeld, dated as of
August 16, 1999, superseding previous agreement
10.2 Employment Agreement of Charles A. Ponthier, dated
January 20, 2000
10.3 Employment Agreement of Mark Smith, dated January 20, 2000
27 Financial Data Schedule
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<PAGE> 1
EXHIBIT 10.1
VANS, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement" herein) is entered into as of August
16, 1999, by and between VANS, INC., a Delaware corporation (the "Company"), and
GARY H. SCHOENFELD ("Employee").
1. Employment and Duties. The Company hereby employs Employee as President
and Chief Executive Officer of the Company on the terms and subject to the
conditions contained in this Agreement. Employee shall be responsible for the
management and direction of all aspects of the Company's business. Employee
hereby accepts such employment and agrees to perform in good faith and to the
best of Employee's ability all services which may be required of Employee
hereunder, to do what is asked of him, and to be available to render services at
all times and places in accordance with such directions, requests, rules and
regulations made by the Company in connection with Employee's employment.
Employee hereby acknowledges and understands the duties and services that are
expected of him hereunder, and he hereby represents that he has the experience
and knowledge to perform such duties and services. Employee shall, during the
term hereof, devote Employee's full time and energy to performing his duties.
Employee shall report to the Board of Directors of the Company. Employee shall
be based at the Company's corporate offices. Employee understands, however, that
Employee may be required to travel up to 20% of his time within and out of the
State of California to discharge his duties hereunder.
2. Term of Employment. The term of this Agreement shall commence as of the
date hereof and shall terminate on August 15, 2002. Notwithstanding the
foregoing, the term of this Agreement automatically shall extend for one
additional year on each anniversary date hereof, unless sooner terminated as
provided HEREIN. AS PROVIDED FURTHER IN PARAGRAPH 11.1 BELOW, THIS AGREEMENT
CONSTITUTES AN EMPLOYMENT AT-WILL THAT MAY BE TERMINATED AT ANY TIME BY COMPANY
OR EMPLOYEE, WITH OR WITHOUT CAUSE, NOTWITHSTANDING THE ROLLING THREE - YEAR
TERM OF THIS AGREEMENT. IF EMPLOYEE IS TERMINATED WITHOUT CAUSE DURING THE TERM
HEREOF, OR AFTER A "CHANGE IN MANAGEMENT OR CONTROL," AS DEFINED IN PARAGRAPH
11.5 BELOW, OR TERMINATES THIS AGREEMENT FOR "GOOD REASON," AS DEFINED IN
PARAGRAPH 11.3 BELOW, EMPLOYEE'S SOLE REMEDY SHALL BE THE COMPENSATION SET FORTH
IN PARAGRAPH 11.4 BELOW.
Initial /s/ CEG Initial /s/ GHS
------- ----------
Representative Employee
of the Company
<PAGE> 2
3. Salary Compensation. As salary compensation for Employee's services
hereunder and all the rights granted hereunder by Employee to the Company, the
Company shall pay Employee a gross salary of no less than $350,000.00 per annum.
Employee's salary shall be payable in bi-weekly increments in accordance with
the Company's payroll practices for salaried employees, upon the condition that
Employee fully and faithfully performs Employee's services hereunder in
accordance with the terms and conditions of this Agreement. The Company shall
deduct and withhold from the compensation payable to Employee hereunder any and
all amounts required to be deducted or withheld by the Company under the
provisions of any statute, regulation, ordinance, or order and any and all
amendments hereinafter enacted requiring the withholding or deducting from
compensation payable to employees.
4. Expense Reimbursement. Employee shall be reimbursed by the Company for
all traveling, hotel, entertainment and other expenses that are properly and
necessarily incurred by Employee, pursuant to the Company's policies on the
same.
5. Death or Disability of Employee.
5.1 General. In the event of Employee's death or "disability" (as such
term is defined in Paragraph 5.2 hereof) while in the employ of the Company,
this Agreement shall terminate upon the date of death or disability and the
Company shall thereafter be required to make payments and provide benefits to
Employee as provided in Paragraph 11.2 hereof. If Employee shall recover from
such disability prior to the expiration date of the Agreement, this Agreement
and Employee's employment hereunder shall be reinstated for the balance of the
term of this Agreement.
5.2 Definition of Disability. Employee shall be deemed disabled if, in
the sole opinion of the Company, Employee is unable to substantially perform the
services required of Employee hereunder for a period in excess of 60 consecutive
work days or 60 work days during any 90 work day period. In such event, Employee
shall be deemed disabled as of such 60th workday.
6. Restrictive Covenant. During the term of this Agreement, Employee shall
(i) devote substantially all of his full time and energy to the performance of
his duties described herein; (ii) not directly or indirectly provide services to
or through any company or firm except the Company unless otherwise instructed by
the Company; (iii) not directly or indirectly own, manage, operate, join,
control, contribute to, or participate in the ownership, management, operation
or control of or be employed by or connected in any manner with any enterprise
which is engaged in any business competitive with or similar to that of the
Company; and (iv) not render any services of any kind or character for
Employee's own account of for any other person, firm or corporation without
first obtaining the Company's consent in writing; provided, however, Employee
shall have the right to perform such incidental services as are necessary in
connection with Employee's (a) private passive investments where he is not
obligated or required
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to, and shall not in fact, devote any managerial efforts, as long as such
investments are not in companies which are in competition in any way with the
Company; or (b) charitable or community activities, or in trade or professional
organizations, provided that such incidental services do not interfere with the
performance of Employee's services hereunder. Notwithstanding anything to the
contrary contained herein, Employee shall be permitted to serve on the Board of
Directors of Fitness Holdings, Inc. during the term of this Agreement.
7. Non-Solicitation. Employee shall not, during the full term of this
Agreement and for a period of one (1) year thereafter, for himself or on behalf
of any other person, partnership, corporation or entity, directly or indirectly,
or by action in concert with others, solicit, induce, suggest or encourage any
person known to him to be an employee of the Company or any affiliate of the
Company to terminate his or her employment or other contractual relationship
with the Company or any of its affiliates.
8. Trade Secrets and Related Matters
8.1 Definitions. For purpose of this Section 8:
(a) "Records" means material and confidential files, accounts,
records, log books, documents, drawings, sketches, designs, diagrams, models,
plans, blueprints, specifications, manuals, books, forms, notes, reports,
memoranda, studies, surveys, software, flow charts, data, computer programs,
listing of source code, calculations, recordings, catalogues, compilations of
information, correspondence, confidential data of customers and all copies,
abstracts or summaries of the foregoing in any storage medium, as well as
instruments, tools, storage devices, disks, equipment and all other physical
items related to the business of the Company (other than merely personal items
of a general professional nature), whether prepared by Employee or not.
(b) "Trade Secrets" means confidential business or technical
information or trade secrets of the Company which Employee acquires while
employed by the Company, whether or not conceived of, developed or prepared by
Employee or at his direction and includes:
(i) Any information or compilation of information concerning
the Company's financial position, financing, purchasing, accounting, marketing,
merchandising, sales, salaries, pricing, investments, costs, profits, plans for
future development, employees, prospective employees, research, development,
formulae, patterns, inventions, plans, specifications, devices, products,
procedures, processes, operations, techniques, software, computer programs or
data;
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(ii) Any information or compilation of information
concerning the identity, plans, requirements, preferences, practices and methods
of doing business on specific customers, suppliers, prospective customers and
prospective suppliers of the Company;
(iii) Any other information or "know how" which is related
to any product, process, service, business or research of the Company; and
(iv) Any information which the Company acquires from another
party and treats as its proprietary information or designates as "Confidential,"
whether or not owned or developed by the Company.
Notwithstanding the foregoing, "Trade Secrets" do not include any of the
following:
(i) Information which is publicly known or which is
generally employed by the trade, whether on or after the date that Employee
first acquires the information;
(ii) General information or knowledge which Employee would
have learned in the course of similar work elsewhere in the trade; or
(iii) Information which Employee can prove was known by
Employee before the commencement of Employee's engagement by the Company;
8.2 Acknowledgments. Employee acknowledges that:
(a) Employee's relationship with the Company will be a
confidential relationship in which Employee will have access to and may create
Trade Secrets.
(b) The Company uses the Trade Secrets in its business to obtain
a competitive advantage over its competitors who do not know or use that
information.
(c) The protection of the Trade Secrets against unauthorized
disclosure or use is of critical importance in maintaining the competitive
position of the Company.
8.3 Protection of Trade Secrets. Employee shall not at any time,
without the prior written consent of the Company, which may be withheld by it in
its sole and absolute discretion, use any Trade Secret in any way except in
connection with duties to the Company.
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8.4 Records.
(a) Ownership. All Records are and shall remain the exclusive
property of the Company.
(b) Return of Records. At the termination of this Agreement,
Employee shallpromptly return to the Company all Records in Employee's
possession or over which Employee has control.
8.5 Prohibited Use of Trade Secrets. During the term of this Agreement
and for 12 months following termination of this Agreement, Employee shall not
undertake any employment or consulting relationship (the "New Activity") if the
loyal and complete fulfillment of his duties in the New Activity would
inherently call upon Employee to reveal any material Trade Secret which could
have a material adverse effect on the Company.
9. Ownership of Material and Ideas. Employee agrees that all material,
ideas, and inventions pertaining to the business of the Company or of any client
of the Company, including but not limited to, all patents and copyrights thereon
and renewals and extensions thereof, trademarks and trade names, belong solely
to the Company. Employee hereby assigns any rights he may have to any such
property to the Company, and agrees to execute and deliver any documents which
evidence such assignment.
10. Employee Plans, etc. Employee shall be entitled to participate, to the
same extent as the other officers of the Company, in any bonus compensation
plan, stock purchase or stock option plan, group life insurance plan, group
medical insurance plan and other compensation or employee benefit plans
(collectively, "Plans") which are available to the other officers of the Company
during the term hereof and for which Employee shall qualify, including
specifically the Company's annual bonus plan for executive officers pursuant to
which Employee shall have the opportunity to earn an annual bonus equal to one
hundred percent (100%) of his salary compensation, subject to the terms and
conditions of the plan. The Company also shall maintain during the term of this
Agreement, a $5.0 million split dollar life insurance policy for the benefit of
Employee, and shall be responsible for the payment of all premiums thereunder.
Employee agrees and acknowledges that he has no vested interest in the
continuance of any Plan, and that no Plan in existence on the date of the
Agreement has acted as a material inducement to Employee in entering into this
Agreement.
11. Termination.
11.1 "At Will" Employment. This Agreement, and Employee's employment,
is at will, and the Company may, with or without notice, terminate this
Agreement and all of the Company's obligations hereunder with or without
"Cause." Employee may also terminate this Agreement at any time, for any reason,
upon the
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giving of thirty (30) days' written notice to the Company; provided, however,
the Company may waive all or any portion of such notice period in its sole and
absolute discretion. Termination by the Company for "Cause" means termination
due to (i) Employee's conviction of a felony ( which, through the lapse of time
or otherwise is not subject to appeal); (ii) Employee's material refusal,
failure or neglect without proper cause to perform adequately his obligations
under this Agreement or follow the instructions of his supervisor(s); (iii) any
willful misconduct by Employee; (iv) Employee's knowing material breach of any
of his fiduciary obligations as an executive officer of the Company; (v)
Employee's material failure to adhere to the code of conduct and rules set forth
in the Company's Employee Handbook, as amended or in existence from time to
time; (vi) the death or disability of Employee; or (vii) the voluntary
termination by Employee of his employment, except for "Good Reason" (as defined
in Paragraph 11.3 hereof).
11.2 Termination for Cause. Upon termination for Cause, the Company
shall only be required to pay Employee (i) accrued salary compensation due to
Employee as compensation for services rendered hereunder and not previously
paid; (ii) accrued vacation pay; and (iii) any appropriate business expenses
incurred by Employee in connection with his duties hereunder and approved
pursuant to Section 4 hereof, all through the date of termination. Employee
shall not be entitled to any severance compensation; bonus compensation, whether
"vested" or unvested; or any other compensation, benefits or reimbursement of
any kind. Notwithstanding the foregoing, in the event the Cause for termination
of this Agreement is the death or disability of Employee, the Company shall pay
Employee's salary and other benefits hereunder for a period of two (2) years
from the date of death or disability. Employee or Employee's estate shall have
the option, in his or its sole discretion, to receive such payments in one lump
sum.
11.3 Termination for "Good Reason." Employee may terminate this
Agreement for "Good Reason" (as hereinafter defined) upon thirty (30) days
written notice to the Company. The term "Good Reason" means (i) Employee is not
appointed or is removed from the position of President and Chief Executive
Officer without Cause during the term of this Agreement; (ii) without Employee's
consent, a majority of the duties defined in Section 1 hereof are removed from
Employee's responsibilities; (iii) without Employee's consent, Employee is
ordered by the Board of Directors to relocate his residence; or (iv) a "Change
in Management or Control" has occurred (as defined in Section 11.5). The term
Good Reason does not include a situation where certain of the duties defined in
Section 1 hereof are removed from Employee's responsibilities and are replaced
with duties which have greater responsibility and/or authority than the duties
which are removed. Unless Employee terminates this Agreement within one hundred
and eighty (180) days of learning from any source that the Company has acted so
as to provide Good Reason for Employee to terminate this Agreement, and gives
thirty (30) days' written notice of such termination, Employee's right to
receive severance compensation pursuant to Paragraph 11.4 for such event shall
be forever lost.
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11.4 Severance Compensation. In the event (i) Employee terminates this
Agreement for Good Reason in accordance with Paragraph 11.3 hereof; (ii)
Employee is terminated for any reason (except death or disability) upon, or
within one year following a "Change in Management or Control (as such term is
defined in Paragraph 11.5 hereof);" or (iii) Employee is terminated without
Cause, the Company shall be obligated to pay severance compensation to Employee
in an amount equal to his salary compensation (at the rate payable at the time
of such termination) for the remaining term of the Agreement. Employee shall
have the option, in his sole discretion, to receive such severance compensation
in one lump sum. Additionally, Employee shall be entitled to exercise the vested
portion of any of his Company stock options for a period of eighteen (18) months
after the date of termination. In addition to the foregoing severance
compensation, the Company shall pay Employee (i) all compensation for services
rendered hereunder and not previously paid; (ii) accrued vacation pay; and (iii)
any appropriate business expenses incurred by Employee in connection with his
duties hereunder and approved pursuant to Section 4 hereof, all through the date
of termination. Employee shall not be entitled to any bonus compensation,
whether vested or unvested; or any other compensation, benefits or reimbursement
of any kind.
11.5 Definition of "Change in Management or Control." The term "Change
in Management or Control" means (i) the time that the Company first determines
that any person and all other persons who constitute a group (within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934 ("Exchange Act"))
have acquired direct or indirect beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act) of twenty percent (20%) or more of the
Company's outstanding securities, unless a majority of the "Continuing
Directors" (as such term is hereinafter defined) approves the acquisition not
later than ten (10) business days after the Company makes that determination, or
(ii) the first day on which a majority of the members of the Company's Board of
Directors are not "Continuing Directors." The term "Continuing Directors" means,
as of any date of determination, any member of the Board of Directors of the
Company who (i) was a member of that Board of Directors on the date of this
Agreement, (ii) has been a member of that Board of Directors for the two years
immediately preceding such date of determination, or (iii) was nominated for
election or elected to the Board of Directors with the affirmative vote of the
greater of (x) a majority of the Continuing Directors who were members of the
Board at the time of such nomination or election, or (y) at least four
Continuing Directors.
11.6 Exclusive Remedy. The payments referred to in this Section 11
shall be exclusive and shall be the only remedy available to Employee for
termination of his employment with the Company, regardless of the circumstances,
reasons or motivation for any such termination. If Employee gives notice of
termination of this Agreement, or if it becomes known that this Agreement will
otherwise terminate in accordance with its provisions, the Company may, in its
sole discretion, relieve
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Employee of his duties under this Agreement or assign Employee other duties and
responsibilities to be performed until the termination becomes effective.
12. Key Man Life Insurance. During the term of this Agreement, the Company
may at any time effect insurance on Employee's life and/or health in such
amounts and in such form as the Company may in its sole discretion decide.
Employee shall not have any interest in such insurance, but shall, if the
Company requests, submit to such medical examinations, supply such information
and execute such documents as may be required in connection with, or so as to
enable the Company to effect, such insurance. The insurance obtained hereunder
shall be in addition to, and not in lieu of, any insurance the Company is
obligated to provide Employee pursuant to Section 10.
13. Vacation. Employee shall have the right during each one year period of
the term of this Agreement to take an aggregate of four weeks of vacation, with
pay, at such times as are mutually convenient to Employee and to the Company.
14. Notices. Any and all notices, demands or other communications required
or desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if given by personal delivery, telex,
facsimile, telegram or if deposited in the United States mail, certified or
registered, postage prepaid, return receipt requested. If such notice, demand or
other communication is given by personal delivery, telex, facsimile or telegram,
service shall be conclusively deemed made at the time of such personal service.
If such notice, demand or other communication is given by mail, such notice
shall be conclusively deemed given forty-eight (48) hours after the deposit
thereof in the United States mail addressed to the party to whom such notice,
demand or other communication is to be given as hereinafter set forth:
To the Company: VANS, INC.
15700 Shoemaker Avenue
Santa Fe Springs, California 90670
Attn: General Counsel
562/565-8413 - facsimile
To Employee: Gary H. Schoenfeld
(at the address set forth below his signature)
Any party hereto may change his or its address for the purpose of receiving
notices, demands and other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
15. Applicable Law and Severability. This Agreement shall, in all respects,
be governed by the laws of the State of California applicable to agreements
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executed and to be wholly performed within the State of California. Nothing
contained herein shall be construed so as to require the commission of any act
contrary to law, and wherever there is any conflict between any provision
contained herein and any present or future statute, law, ordinance or regulation
contrary to which the parties have no legal right to contract, the latter shall
prevail but the provision of this Agreement which is affected shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law.
16. Attorneys' Fees. In the event any action is instituted by a party to
enforce any of the terms and provisions contained herein, the prevailing party
in such action shall be entitled to such reasonable attorneys' fees, costs and
expenses as may be fixed by the Court.
17. Modifications or Amendments. No amendment, change or modification of
this Agreement shall be valid unless in writing and signed by all of the parties
hereto. Further, any amendment, change or modification of this Agreement
(including but not limited to the at-will nature of this Agreement as set forth
in Section 2 and Paragraph 11.1 hereof) must be approved in advance by the Board
of Directors of Company and reflected in the minutes of such Board's meetings or
in an action by unanimous written consent.
18. Successors and Assigns. All of the terms and provisions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
19. Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement, and any and all prior agreements, understandings or representations
are hereby terminated and canceled in their entirety and are of no further force
or effect, including but not limited to that certain Employment Agreement, dated
as of September 1, 1995, as amended.
20. Counterparts. This Agreement may be executed in counterparts.
21. Arbitration of Employment Disputes. Any dispute, claim or controversy
arising out of this Agreement or the employment relationship between Employee
and the Company, including but not limited to, claims by Employee for wrongful
termination, race discrimination, sex discrimination, age discrimination,
discrimination based on nationality or religion, violation of Title VII of the
Civil Rights Act of 1964, as amended, the Americans with Disabilities Act of
1990, the Age Discrimination in Employment Act of 1967, as amended, and the
California Fair Housing and Employment Act, as amended, shall, at any time
following the termination of Employee's employment, be submitted to final and
binding arbitration that shall comply with the applicable arbitration rules of
either the American Arbitration Association or the Judicial Arbitration and
Mediation Service ("JAMS")/Endispute, and
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judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The cost of arbitration (except for the fees and
costs of Employee's attorneys) shall be borne by the Company. The arbitration
shall occur in Los Angeles, California and the parties hereby consent to the
jurisdiction of the arbitrator and to service of process. The Arbitrator shall
issue a written opinion of his or her decision. EMPLOYEE HEREBY UNDERSTANDS
THAT, BY SIGNING THIS AGREEMENT, HE IS AGREEING TO HAVE ANY CLAIM HEREUNDER, OR
UNDER HIS EMPLOYMENT RELATIONSHIP WITH THE COMPANY, DECIDED BY NEUTRAL
ARBITRATION AND IS GIVING UP THE RIGHT TO A JURY OR COURT TRIAL. NOTWITHSTANDING
THE FOREGOING, NOTHING IN THIS PROVISION IS INTENDED TO AFFECT OR RESTRICT ANY
RIGHTS OR REMEDIES EMPLOYEE MIGHT HAVE IF HIS CLAIMS WERE BROUGHT IN COURT.
22. Survival of Certain Provisions. Sections 7,8,9, and 21 of this
Agreement shall survive the termination hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
EMPLOYEE: THE COMPANY:
VANS, INC.,
a Delaware corporation
/s/ Gary H. Schoenfeld By: /s/ Craig E. Gosselin
- ------------------------------------ ----------------------------
Gary H. Schoenfeld Craig E. Gosselin
- ------------------------------------ ----------------------------
Address Title
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EXHIBIT 10.2
VANS, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ( "Agreement" herein) is entered into as of
January 20, 2000, by and between VANS, INC., a Delaware corporation (the
"Company"), and CHUCK PONTHIER ("Employee").
1. Employment and Duties. The Company hereby employs Employee as Vice
President - National Sales of the Company on the terms and subject to the
conditions contained in this Agreement. Employee shall be responsible for
managing the Company's U.S. sales efforts. Employee hereby accepts such
employment and agrees to perform in good faith and to the best of Employee's
ability all services which may be required of Employee hereunder, to do what is
asked of him, and to be available to render services at all times and places in
accordance with such directions, requests, rules and regulations made by the
Company in connection with Employee's employment. Employee hereby acknowledges
and understands the duties and services that are expected of him hereunder, and
he hereby represents that he has the experience and knowledge to perform such
duties and services. Employee shall, during the term hereof, devote Employee's
full time and energy to performing his duties. Employee shall report to the
President and Chief Executive Officer, or such other executive officer as is
determined by the Company. Employee shall be based at the Company's corporate
offices. Employee understands, however, that Employee may be required to travel
within and out of the State of California to discharge his duties hereunder.
2. Term of Employment. The term of this Agreement shall commence as of the
date hereof and shall terminate on January 19, 2003, unless sooner terminated as
provided herein. This Agreement does not give Employee any enforceable right to
employment beyond this term, and Employee agrees that he shall have no rights
hereunder thereafter. AS PROVIDED FURTHER IN PARAGRAPH 11.1 BELOW, THIS
AGREEMENT CONSTITUTES AN EMPLOYMENT AT-WILL THAT MAY BE TERMINATED AT ANY TIME
BY COMPANY OR EMPLOYEE, WITH OR WITHOUT CAUSE, NOTWITHSTANDING THE THREE - YEAR
TERM OF THIS AGREEMENT. IF EMPLOYEE IS TERMINATED WITHOUT CAUSE DURING THE TERM
HEREOF, OR AFTER A "CHANGE IN MANAGEMENT OR CONTROL," AS DEFINED IN PARAGRAPH
11.5 BELOW, OR TERMINATES THIS AGREEMENT FOR "GOOD REASON," AS DEFINED IN
PARAGRAPH 11.3 BELOW, EMPLOYEE'S SOLE REMEDY SHALL BE THE COMPENSATION SET FORTH
IN PARAGRAPH 11.4 BELOW.
Initial /s/ CEG Initial /s/ CP
-------------- ---------
Representative Employee
of the Company
<PAGE> 2
3. Salary Compensation. As salary compensation for Employee's services
hereunder and all the rights granted hereunder by Employee to the Company, the
Company shall pay Employee a gross salary of $135,000.00 per annum. Employee's
salary shall be payable in bi-weekly increments in accordance with the Company's
payroll practices for salaried employees, upon the condition that Employee fully
and faithfully performs Employee's services hereunder in accordance with the
terms and conditions of this Agreement. The Company shall deduct and withhold
from the compensation payable to Employee hereunder any and all amounts required
to be deducted or withheld by the Company under the provisions of any statute,
regulation, ordinance, or order and any and all amendments hereinafter enacted
requiring the withholding or deducting from compensation payable to employees.
4. Expense Reimbursement. Employee shall be reimbursed by the Company for
all traveling, hotel, entertainment and other expenses that are properly and
necessarily incurred by Employee, pursuant to the Company's policies on the
same.
5. Death or Disability of Employee.
5.1 General. In the event of Employee's death or "disability" (as such
term is defined in Paragraph 5.2 hereof) while in the employ of the Company,
this Agreement, and the compensation due to Employee pursuant to Paragraph 3
hereof, shall terminate upon the date of death or disability and the Company
shall thereafter be required to make payments only to Employee, as provided in
Paragraph 11.2 hereof. If Employee shall recover from such disability prior to
the expiration date of the Agreement, this Agreement and Employee's employment
hereunder shall be reinstated for the balance of the term of this Agreement.
5.2 Definition of Disability. Employee shall be deemed disabled if, in
the sole opinion of the Company, Employee is unable to substantially perform the
services required of Employee hereunder for a period in excess of 60 consecutive
work days or 60 work days during any 90 work day period. In such event, Employee
shall be deemed disabled as of such 60th work day.
6. Restrictive Covenant. During the term of this Agreement, Employee shall
(i) devote his full time and energy solely and exclusively to the performance of
his duties described herein; (ii) not directly or indirectly provide services to
or through any company or firm except the Company unless otherwise instructed by
the Company; (iii) not directly or indirectly own, manage, operate, join,
control, contribute to, or participate in the ownership, management, operation
or control of or be employed by or connected in any manner with any enterprise
which is engaged in any business competitive with or similar to that of the
Company; and (iv) not render any services of any kind or character for
Employee's own account of for any other person, firm or corporation without
first obtaining the Company's consent in writing; provided, however, Employee
shall have the right to perform such incidental services as are necessary in
connection
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with Employee's (a) private passive investments where he is not obligated or
required to, and shall not in fact, devote any managerial efforts, as long as
such investments are not in companies which are in competition in any way with
the Company; or (b) charitable or community activities, or in trade or
professional organizations, provided that such incidental services do not
interfere with the performance of Employee's services hereunder.
7. Non-Solicitation. Employee shall not, during the full term of this
Agreement and for a period of one (1) year thereafter, for himself or on behalf
of any other person, partnership, corporation or entity, directly or indirectly,
or by action in concert with others, solicit, induce, suggest or encourage any
person known to him to be an employee of the Company or any affiliate of the
Company to terminate his or her employment or other contractual relationship
with the Company or any of its affiliates.
8. Trade Secrets and Related Matters
8.1 Definitions. For purpose of this Section 8:
(a) "Records" means files, accounts, records, log books,
documents, drawings, sketches, designs, diagrams, models, plans, blueprints,
specifications, manuals, books, forms, notes, reports, memoranda, studies,
surveys, software, flow charts, data, computer programs, listing of source code,
calculations, recordings, catalogues, compilations of information,
correspondence, confidential data of customers and all copies, abstracts or
summaries of the foregoing in any storage medium, as well as instruments, tools,
storage devices, disks, equipment and all other physical items related to the
business of the Company (other than merely personal items of a general
professional nature), whether of a public nature or not, and whether prepared by
Employee or not.
(b) "Trade Secrets" means confidential business or technical
information or trade secrets of the Company which Employee acquires while
employed by the Company, whether or not conceived of, developed or prepared by
Employee or at his direction and includes:
(i) Any information or compilation of information concerning
the Company's financial position, financing, purchasing, accounting, marketing,
merchandising, sales, salaries, pricing, investments, costs, profits, plans for
future development, employees, prospective employees, research, development,
formulae, patterns, inventions, plans, specifications, devices, products,
procedures, processes, operations, techniques, software, computer programs or
data;
(ii) Any information or compilation of information
concerning the identity, plans, requirements, preferences, practices and methods
of doing business on specific customers, suppliers, prospective customers and
prospective suppliers of the Company;
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(iii) Any other information or "know how" which is related
to any product, process, service, business or research of the Company; and
(iv) Any information which the Company acquires from another
party and treats as its proprietary information or designates as "Confidential,"
whether or not owned or developed by the Company.
Notwithstanding the foregoing, "Trade Secrets" do not include any of the
following:
(i) Information which is publicly known or which is
generally employed by the trade, whether on or after the date that Employee
first acquires the information;
(ii) General information or knowledge which Employee would
have learned in the course of similar work elsewhere in the trade; or
(iii) Information which Employee can prove was known by
Employee before the commencement of Employee's engagement by the Company;
8.2 Acknowledgments. Employee acknowledges that:
(a) Employee's relationship with the Company will be a
confidential relationship in which Employee will have access to and may create
Trade Secrets.
(b) The Company uses the Trade Secrets in its business to obtain
a competitive advantage over its competitors who do not know or use that
information.
(c) The protection of the Trade Secrets against unauthorized
disclosure or use is of critical importance in maintaining the competitive
position of the Company.
8.3 Protection of Trade Secrets. Employee shall not at any time,
without the prior written consent of the Company, which may be withheld by it in
its sole and absolute discretion, disclose any Trade Secret in any way except to
employees of the Company, and shall not use any Trade Secret in any way except
in connection with his or her duties to the Company.
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8.4 Records.
(a) Ownership. All Records are and shall remain the exclusive
property of the Company.
(b) Return of Records. At the termination of this Agreement,
Employee shall promptly return to the Company all records in Employee's
possession or over which Employee has control.
8.5 Prohibited Use of Trade Secrets. During the term of this Agreement
and for 12 months following termination of this Agreement, Employee shall not
undertake any employment or consulting relationship (the "New Activity") if the
loyal and complete fulfillment of his or her duties in the New Activity would
inherently call upon Employee to reveal any Trade Secret.
9. Ownership of Material and Ideas. Employee agrees that all material,
ideas, and inventions pertaining to the business of the Company or of any client
of the Company, including but not limited to, all patents and copyrights thereon
and renewals and extensions thereof, trademarks and trade names, and the names,
addresses and telephone numbers of customers, distributors and sales
representatives of the Company, belong solely to the Company. Employee hereby
assigns any rights he may have to any such property to the Company, and agrees
to execute and deliver any documents which evidence such assignment.
10. Employee Plans, etc. Employee shall be entitled to participate, to the
same extent as most other officers of the Company, in any bonus compensation
plan, stock purchase or stock option plan, group life insurance plan, group
medical insurance plan and other compensation or employee benefit plans
(collectively, "Plans") which are generally available to a majority of the other
officers of the Company during the term hereof and for which Employee shall
qualify. Employee further understands, however, that the Board of Directors, or
such committee or person or persons designated by the Board of Directors, shall
determine in its sole discretion (i) whether any Plans are made available to a
majority of the officers of the Company; (ii) whether one or more Plans are
adopted solely for the Chief Executive Officer and/or one or more (but not a
majority) of the officers of the Company; (iii) whether one or more Plans are
made available to a majority of the officers; and (iv) the amounts payable or
the benefits provided thereunder to each participant in whole or in part.
Employee agrees and acknowledges that he has no vested interest in the
continuance of any Plan, and that no Plan in existence on the date of the
Agreement has acted as a material inducement to Employee in entering into this
Agreement.
11. Termination.
11.1 "At Will" Employment. This Agreement, and Employee's employment,
is at will, and the Company may, with or without notice, terminate this
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Agreement and all of the Company's obligations hereunder with or without
"Cause." Employee may also terminate this Agreement at any time, for any reason,
upon the giving of thirty (30) days' written notice to the Company; provided,
however, the Company may waive all or any portion of such notice period in its
sole and absolute discretion. Termination by the Company for "Cause" means
termination due to (i) Employee's conviction of a felony ( which, through the
lapse of time or otherwise is not subject to appeal); (ii) Employee's material
refusal, failure or neglect without proper cause to perform adequately his
obligations under this Agreement or follow the instructions of his
supervisor(s); (iii) any negligence or willful misconduct by Employee; (iv)
Employee's material breach of any of his fiduciary obligations as an executive
officer of the Company; (v) Employee's material failure to adhere to the code of
conduct and rules set forth in the Company's Employee Handbook, as amended or in
existence from time to time; (vi) the death or disability of Employee; or (vii)
the voluntary termination by Employee of his employment, except for "Good
Reason" (as defined in Paragraph 11.3 hereof).
11.2 Termination for Cause. Upon termination for Cause, the Company
shall only be required to pay Employee (i) accrued salary compensation due to
Employee as compensation for services rendered hereunder and not previously
paid; (ii) accrued vacation pay; and (iii) any appropriate business expenses
incurred by Employee in connection with his duties hereunder and approved
pursuant to Section 4 hereof, all through the date of termination. Employee
shall not be entitled to any severance compensation; bonus compensation, whether
"vested" or unvested; or any other compensation, benefits or reimbursement of
any kind.
11.3 Termination for "Good Reason." Employee may terminate this
Agreement for "Good Reason" (as hereinafter defined) upon thirty (30) days
written notice to the Company. The term "Good Reason" means (i) Employee is not
appointed or is removed from the position of Vice President - National Sales
without Cause during the term of this Agreement; or (ii) without Employee's
consent, a majority of the duties defined in Section 1 hereof are removed from
Employee's responsibilities. The term Good Reason does not include a situation
where certain of the duties defined in Section 1 hereof are removed from
Employee's responsibilities and are replaced with duties which have greater
responsibility and/or authority than the duties which are removed. Unless
Employee terminates this Agreement within thirty (30) days of learning from any
source that the Company has acted so as to provide Good Reason for Employee to
terminate this Agreement, and gives thirty (30) days' written notice of such
termination, Employee's right to receive severance compensation pursuant to
Paragraph 11.4 for such event shall be forever lost.
11.4 Severance Compensation. In the event (i) Employee terminates this
Agreement for Good Reason in accordance with Paragraph 11.3 hereof; (ii)
Employee is terminated for any reason (except death or disability) upon, or
within six months following, a "Change in Management or Control (as such term is
defined in Paragraph 11.5 hereof);" or (iii) Employee is terminated without
Cause, the Company
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shall be obligated to pay severance compensation to Employee in an amount equal
to his salary compensation (at the rate payable at the time of such termination)
for a period of the greater of (i) the remaining portion of the term of this
Agreement, or (ii) six (6) months from the date of termination. If the term of
this Agreement is not extended, and Employee is subsequently terminated without
Cause or terminates his employment with the Company for Good Reason, the Company
shall be obligated to pay severance compensation to Employee in an amount equal
to his salary compensation for a period of six (6) months from the date of
termination. Notwithstanding the foregoing, if Employee is employed by a new
employer, or as a consultant during either of the above severance payment
periods, the severance compensation payable to Employee hereunder shall be
reduced by the amount of compensation that Employee actually receives from the
new employer, or as a consultant. However, Employee shall have a duty to inform
the Company that he has obtained such new employment, and the failure to do so
is a material breach of this Agreement. In such event, the Company shall be
entitled to (i) cease all payments to Employee under this Paragraph 11.4; and
(ii) recover any unauthorized payments to Employee in an action for breach of
contract. Notwithstanding anything else in this Agreement to the contrary,
solely in the event of a termination upon or following a Change in Management or
Control, the amount of severance compensation paid to Employee hereunder shall
not include any amount that the Company is prohibited from deducting for federal
income tax purposes by virtue of Section 280G of the Internal Revenue Code of
1986, as amended, or any successor provision. In addition to the foregoing
severance compensation, the Company shall pay Employee (i) all compensation for
services rendered hereunder and not previously paid; (ii) accrued vacation pay;
and (iii) any appropriate business expenses incurred by Employee in connection
with his duties hereunder and approved pursuant to Section 4 hereof, all through
the date of termination. Employee shall not be entitled to any bonus
compensation, whether vested or unvested; or any other compensation, benefits or
reimbursement of any kind.
11.5 Definition of "Change in Management or Control." The term "Change
in Management or Control" means (i) the time that the Company first determines
that any person and all other persons who constitute a group (within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934 ("Exchange Act"))
have acquired direct or indirect beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act) of twenty percent (20%) or more of the
Company's outstanding securities, unless a majority of the "Continuing
Directors" (as such term is hereinafter defined) approves the acquisition not
later than ten (10) business days after the Company makes that determination, or
(ii) the first day on which a majority of the members of the Company's Board of
Directors are not "Continuing Directors." The term "Continuing Directors" means,
as of any date of determination, any member of the Board of Directors of the
Company who (i) was a member of that Board of Directors on the date of this
Agreement, (iii) has been a member of that Board of Directors for the two years
immediately preceding such date of determination, or (iv) was nominated for
election or elected to the Board of Directors with the affirmative vote of the
greater of (x)
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a majority of the Continuing Directors who were members of the Board at the time
of such nomination or election, or (y) at least six Continuing Directors.
11.6 Exclusive Remedy. The payments referred to in this Section 11
shall be exclusive and shall be the only remedy available to Employee for
termination of his employment with the Company, regardless of the circumstances,
reasons or motivation for any such termination. If Employee gives notice of
termination of this Agreement, or if it becomes known that this Agreement will
otherwise terminate in accordance with its provisions, the Company may, in its
sole discretion, relieve Employee of his duties under this Agreement or assign
Employee other duties and responsibilities to be performed until the termination
becomes effective.
12. Services Unique. It is agreed that the services to be rendered by
Employee hereunder are of a special, unique, unusual, extraordinary and
intellectual character which gives them a peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in an action at law
and that a breach by Employee of any of the provisions contained herein will
cause the Company irreparable injury and damage. Employee expressly agrees that
the Company shall be entitled to injunctive or other equitable relief to prevent
a breach hereof. Resort to any such equitable relief shall not be construed as a
waiver of any of the rights or remedies which the Company may have against
Employee for damages or otherwise.
13. Key Man Life Insurance. During the term of this Agreement, the Company
may at any time effect insurance on Employee's life and/or health in such
amounts and in such form as the Company may in its sole discretion decide.
Employee shall not have any interest in such insurance, but shall, if the
Company requests, submit to such medical examinations, supply such information
and execute such documents as may be required in connection with, or so as to
enable the Company to effect, such insurance.
14. Vacation. Employee shall have the right during each one year period of
the term of this Agreement to take an aggregate of three weeks of vacation, with
pay, at such times as are mutually convenient to Employee and to the Company.
15. Notices. Any and all notices, demands or other communications required
or desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if given by personal delivery, telex,
facsimile, telegram or if deposited in the United States mail, certified or
registered, postage prepaid, return receipt requested. If such notice, demand or
other communication is given by personal delivery, telex, facsimile or telegram,
service shall be conclusively deemed made at the time of such personal service.
If such notice, demand or other communication is given by mail, such notice
shall be conclusively deemed given forty-eight (48) hours after the deposit
thereof in the United States mail addressed to the party to whom such notice,
demand or other communication is to be given as hereinafter set forth:
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To the Company: VANS, INC.
15700 Shoemaker Avenue
Santa Fe Springs, California 90670
Attn: General Counsel
562/565-8413 - facsimile
To Employee: Chuck Ponthier
(at the address set forth below his signature)
Any party hereto may change his or its address for the purpose of receiving
notices, demands and other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
16. Applicable Law and Severability. This Agreement shall, in all respects,
be governed by the laws of the State of California applicable to agreements
executed and to be wholly performed within the State of California. Nothing
contained herein shall be construed so as to require the commission of any act
contrary to law, and wherever there is any conflict between any provision
contained herein and any present or future statute, law, ordinance or regulation
contrary to which the parties have no legal right to contract, the latter shall
prevail but the provision of this Agreement which is affected shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law.
17. Attorneys' Fees. In the event any action is instituted by a party to
enforce any of the terms and provisions contained herein, the prevailing party
in such action shall be entitled to such reasonable attorneys' fees, costs and
expenses as may be fixed by the Court.
18. Modifications or Amendments. No amendment, change or modification of
this Agreement shall be valid unless in writing and signed by all of the parties
hereto. Further, any amendment, change or modification of this Agreement
(including but not limited to the at-will nature of this Agreement as set forth
in Section 2 and Paragraph 11.1 hereof) must be approved in advance by the Board
of Directors of Company and reflected in the minutes of such Board's meetings or
in an action by unanimous written consent.
19. Successors and Assigns. All of the terms and provisions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
20. Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement, and any and all prior agreements, understandings or representations
are hereby terminated and canceled in their entirety and are of no further force
or effect.
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21. Counterparts. This Agreement may be executed in counterparts.
22. Arbitration of Employment Disputes. Any dispute, claim or controversy
arising out of this Agreement, the meaning, interpretation or application of
this Agreement, or the employment relationship between Employee and the Company
shall be submitted to final and binding arbitration that shall comply with the
applicable arbitration rules of the American Arbitration Association or the
Judicial Arbitration and Mediation Service ("JAMS")/Endispute, and judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Additionally, all issues regarding the scope of the
arbitration; whether an agreement to arbitrate exists and, if so, whether it
covers the disputes in question; or any other question of arbitrability or form
of disagreement or conflict among the parties to this Agreement, shall be
submitted to final and binding arbitration. The cost of arbitration (except for
Employee's attorneys' fees and costs) shall be borne by the Company. The
arbitration shall occur in Los Angeles, California and the parties hereby
consent to the jurisdiction of the arbitrator and to service of process. The
arbitrator shall issue a written opinion regarding his/her decision. EMPLOYEE
HEREBY UNDERSTANDS THAT, BY SIGNING THIS AGREEMENT, HE IS AGREEING TO HAVE ANY
CLAIM HEREUNDER DECIDED BY NEUTRAL ARBITRATION AND IS GIVING UP THE RIGHT TO A
JURY OR COURT TRIAL. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS PROVISION IS
INTENDED TO AFFECT OR RESTRICT ANY RIGHTS OR REMEDIES EMPLOYEE MIGHT HAVE IF HIS
CLAIMS WERE BOUGHT IN COURT.
23. Survival of Certain Provisions. Sections 7,8,9, and 22 of this
Agreement shall survive the termination hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
EMPLOYEE: THE COMPANY:
VANS, INC.,
a Delaware corporation
/s/ Chuck Ponthier By: /s/ Craig E. Gosselin
- ----------------------------------- -----------------------
Chuck Ponthier Craig E. Gosselin
- ------------------------------------ --------------------------
Address Title
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EXHIBIT 10.3
VANS, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement" herein) is entered into as of
January 20, 2000, by and between VANS, INC., a Delaware corporation (the
"Company"), and MARK SMITH ("Employee").
1. Employment and Duties. The Company hereby employs Employee as Vice
President - Design of the Company on the terms and subject to the conditions
contained in this Agreement. Employee shall be responsible for the creative
direction of the Company's footwear design and managing the Company's footwear
designers. Employee hereby accepts such employment and agrees to perform in good
faith and to the best of Employee's ability all services which may be required
of Employee hereunder, to do what is asked of him, and to be available to render
services at all times and places in accordance with such directions, requests,
rules and regulations made by the Company in connection with Employee's
employment. Employee hereby acknowledges and understands the duties and services
that are expected of him hereunder, and he hereby represents that he has the
experience and knowledge to perform such duties and services. Employee's
performance shall be reviewed no less than twice per year. Each performance
review will include a determination as to whether the term of this Agreement
will be extended and as to whether Employee's compensation will be increased
(provided, however, that in no event can Employee's compensation be decreased
during the term of this Agreement). Employee shall, during the term hereof,
devote Employee's full time and energy to performing his duties. Employee shall
report to the Senior Vice President - Apparel and International of the Company.
Employee shall be based at the Company's corporate offices. Employee
understands, however, that Employee may be required to travel within and out of
the State of California to discharge his duties hereunder.
2. Term of Employment. The term of this Agreement shall commence as of the
date hereof and shall terminate on January 19, 2003, unless sooner terminated as
provided herein or unless extended as provided herein. This Agreement does not
give Employee any enforceable right to employment beyond this term, and Employee
agrees that he shall have no rights hereunder thereafter. AS PROVIDED FURTHER IN
PARAGRAPH 11.1 BELOW, THIS AGREEMENT CONSTITUTES AN EMPLOYMENT AT-WILL THAT MAY
BE TERMINATED AT ANY TIME BY COMPANY OR EMPLOYEE, WITH OR WITHOUT CAUSE,
NOTWITHSTANDING THE THREE - YEAR TERM OF THIS AGREEMENT. IF EMPLOYEE IS
TERMINATED WITHOUT CAUSE DURING THE TERM HEREOF, OR AFTER A "CHANGE IN
MANAGEMENT OR CONTROL," AS DEFINED IN PARAGRAPH 11.5 BELOW, OR TERMINATES THIS
AGREEMENT FOR "GOOD REASON," AS DEFINED IN PARAGRAPH 11.3 BELOW, EMPLOYEE'S SOLE
REMEDY SHALL BE THE COMPENSATION SET FORTH IN PARAGRAPH 11.4 BELOW.
Initial /s/ CEG Initial /s/ MS
--------- ----------
Representative Employee
of the Company
<PAGE> 2
3. Salary Compensation; Signing Bonus.
3.1 As salary compensation for Employee's services hereunder and all
the rights granted hereunder by Employee to the Company, the Company shall pay
Employee a gross salary of no less than $185,000.00 per annum. Employee's salary
shall be payable in bi-weekly increments in accordance with the Company's
payroll practices for salaried employees, upon the condition that Employee fully
and faithfully performs Employee's services hereunder in accordance with the
terms and conditions of this Agreement. The Company shall deduct and withhold
from the compensation payable to Employee hereunder any and all amounts required
to be deducted or withheld by the Company under the provisions of any statute,
regulation, ordinance, or order and any and all amendments hereinafter enacted
requiring the withholding or deducting from compensation payable to employees.
3.2 The Company shall pay Employee a "signing bonus" of $15,000, net
to Employee, on the day Employee begins performance of his employment duties
with the Company.
4. Expense Reimbursement. Employee shall be reimbursed by the Company for
all traveling, hotel, entertainment and other expenses that are properly and
necessarily incurred by Employee, pursuant to the Company's policies on the
same.
5. Death or Disability of Employee.
5.1 General. In the event of Employee's death or "disability" (as such
term is defined in Paragraph 5.2 hereof) while in the employ of the Company,
this Agreement, and the compensation due to Employee pursuant to Paragraph 3
hereof, shall terminate upon the date of death or disability and the Company
shall thereafter be required to make payments only to Employee, as provided in
Paragraph 11.2 hereof. If Employee shall recover from such disability prior to
the expiration date of the Agreement, this Agreement and Employee's employment
hereunder shall be reinstated for the balance of the term of this Agreement.
5.2 Definition of Disability. Employee shall be deemed disabled if, in
the sole opinion of the Company, Employee is unable to substantially perform the
services required of Employee hereunder for a period in excess of 60 consecutive
work days or 60 work days during any 90 work day period. In such event, Employee
shall be deemed disabled as of such 60th workday.
6. Restrictive Covenant. During the term of this Agreement, Employee shall
(i) devote his full time and energy solely and exclusively to the performance of
his duties described herein; (ii) not directly or indirectly provide services to
or through any company or firm except the Company unless otherwise instructed by
the Company; (iii) not directly or indirectly own, manage, operate, join,
control, contribute to, or participate in the ownership, management, operation
or control of or be employed by or connected
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in any manner with any enterprise which is engaged in any business competitive
with or similar to that of the Company; and (iv) not render any services of any
kind or character for Employee's own account of for any other person, firm or
corporation without first obtaining the Company's consent in writing; provided,
however, Employee shall have the right to perform such incidental services as
are necessary in connection with Employee's (a) private passive investments
where he is not obligated or required to, and shall not in fact, devote any
managerial efforts, as long as such investments are not in companies which are
in competition in any way with the Company; or (b) charitable or community
activities, or in trade or professional organizations, provided that such
incidental services do not interfere with the performance of Employee's services
hereunder.
7. Non-Solicitation. Employee shall not, during the full term of this
Agreement and for a period of one (1) year thereafter, for himself or on behalf
of any other person, partnership, corporation or entity, directly or indirectly,
or by action in concert with others, solicit, induce, suggest or encourage any
person known to him to be an employee of the Company or any affiliate of the
Company to terminate his or her employment or other contractual relationship
with the Company or any of its affiliates.
8. Trade Secrets and Related Matters
8.1 Definitions. For purpose of this Section 8:
(a) "Records" means files, accounts, records, log books,
documents, drawings, sketches, designs, diagrams, models, plans, blueprints,
specifications, manuals, books, forms, notes, reports, memoranda, studies,
surveys, software, flow charts, data, computer programs, listing of source code,
calculations, recordings, catalogues, compilations of information,
correspondence, confidential data of customers and all copies, abstracts or
summaries of the foregoing in any storage medium, as well as instruments, tools,
storage devices, disks, equipment and all other physical items related to the
business of the Company (other than merely personal items of a general
professional nature), whether of a public nature or not, and whether prepared by
Employee or not.
(b) "Trade Secrets" means confidential business or technical
information or trade secrets of the Company which Employee acquires while
employed by the Company, whether or not conceived of, developed or prepared by
Employee or at his direction and includes:
(i) Any information or compilation of information concerning
the Company's financial position, financing, purchasing, accounting, marketing,
merchandising, sales, salaries, pricing, investments, costs, profits, plans for
future development, employees, prospective employees, research, development,
formulae, patterns, inventions, plans, specifications, devices, products,
procedures, processes, operations, techniques, software, computer programs or
data;
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(ii) Any information or compilation of information
concerning the identity, plans, requirements, preferences, practices and methods
of doing business on specific customers, suppliers, prospective customers and
prospective suppliers of the Company;
(iii) Any other information or "know how" which is related
to any product, process, service, business or research of the Company; and
(iv) Any information which the Company acquires from another
party and treats as its proprietary information or designates as "Confidential,"
whether or not owned or developed by the Company.
Notwithstanding the foregoing, "Trade Secrets" do not include any of the
following:
(i) Information which is publicly known or which is
generally employed by the trade, whether on or after the date that Employee
first acquires the information;
(ii) General information or knowledge which Employee would
have learned in the course of similar work elsewhere in the trade; or
(iii) Information which Employee can prove was known by
Employee before the commencement of Employee's engagement by the Company;
8.2 Acknowledgments. Employee acknowledges that:
(a) Employee's relationship with the Company will be a confidential
relationship in which Employee will have access to and may create Trade Secrets.
(b) The Company uses the Trade Secrets in its business to obtain a
competitive advantage over its competitors who do not know or use that
information.
(c) The protection of the Trade Secrets against unauthorized
disclosure or use is of critical importance in maintaining the competitive
position of the Company.
8.3 Protection of Trade Secrets. Employee shall not at any time, without
the prior written consent of the Company, which may be withheld by it in its
sole and absolute discretion, disclose any Trade Secret in any way except to
employees of the Company, and shall not use any Trade Secret in any way except
in connection with his or her duties to the Company.
8.4 Records.
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(a) Ownership. All Records are and shall remain the exclusive property
of the Company.
(b) Return of Records. At the termination of this Agreement, Employee
shall promptly return to the Company all records in Employee's possession or
over which Employee has control.
8.5 Prohibited Use of Trade Secrets. During the term of this Agreement and
for 12 months following termination of this Agreement, Employee shall not
undertake any employment or consulting relationship (the "New Activity") if the
loyal and complete fulfillment of his or her duties in the New Activity would
inherently call upon Employee to reveal any Trade Secret.
9. Ownership of Material and Ideas. Employee agrees that all material,
ideas, and inventions pertaining to the business of the Company or of any client
of the Company, including but not limited to, all patents and copyrights thereon
and renewals and extensions thereof, trademarks and trade names, and the names,
addresses and telephone numbers of customers, distributors and sales
representatives of the Company, belong solely to the Company. Employee hereby
assigns any rights he may have to any such property to the Company, and agrees
to execute and deliver any documents which evidence such assignment.
10. Employee Plans, etc. Employee shall be entitled to participate, to the
same extent as most other officers of the Company, in any bonus compensation
plan, stock purchase or stock option plan, group life insurance plan, group
medical insurance plan and other compensation or employee benefit plans
(collectively, "Plans") which are generally available to a majority of the other
officers of the Company during the term hereof and for which Employee shall
qualify. Employee further understands, however, that the Board of Directors, or
such committee or person or persons designated by the Board of Directors, shall
determine in its sole discretion (i) whether any Plans are made available to a
majority of the officers of the Company; (ii) whether one or more Plans are
adopted solely for the Chief Executive Officer and/or one or more (but not a
majority) of the officers of the Company; (iii) whether one or more Plans are
made available to a majority of the officers; and (iv) the amounts payable or
the benefits provided thereunder to each participant in whole or in part.
Employee agrees and acknowledges that he has no vested interest in the
continuance of any Plan, and that no Plan in existence on the date of the
Agreement has acted as a material inducement to Employee in entering into this
Agreement. Notwithstanding anything to the contrary contained herein, the
Company shall use its best efforts to cause the Compensation Committee of the
Board of Directors to grant Employee an incentive stock option for 15,000 shares
of the Company's Common Stock with a three-year vesting schedule. Employee shall
be entitled to participate in the Company's Fiscal 2000 Bonus Plan with an
opportunity to receive a bonus equal to 30% of his salary, subject to terms and
conditions of the Plan.
11. Termination.
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11.1 "At Will" Employment. This Agreement, and Employee's employment,
is at will, and the Company may, with or without notice, terminate this
Agreement and all of the Company's obligations hereunder with or without
"Cause." Employee may also terminate this Agreement at any time, for any reason,
upon the giving of thirty (30) days' written notice to the Company; provided,
however, the Company may waive all or any portion of such notice period in its
sole and absolute discretion. For "Cause," as used in this Agreement, shall
mean: (i) Employee's conviction of a felony (which through the lapse of time or
otherwise is not subject to appeal) which has a material adverse impact on the
Company's' financial condition or reputation; (ii) Employee's willful refusal or
repeated neglect, without "Good Reason," to perform his duties under Section 1
of this Agreement; (iii) Employee's material breach of his fiduciary obligations
as an executive officer of the Company, if such breach has a serious adverse
impact upon the Company's financial condition or reputation; (iv) Employee's
intentional and material failure to adhere to the code of conduct and rules set
forth in the Company's Employee handbook, as amended from time to time; (v) the
death or disability of the Employee; and (vi) the voluntary termination by
Employee of his employment without "Good Reason" as defined in paragraph 11.3,
provided, however that with respect to (ii), (iii) and (iv) the Company must
first provide Employee a written notice (including all written evidence)
specifying the failure or breach on Employee's part and affording Employee
thirty (30) days to cure the violation to the reasonable satisfaction of the
Company.
11.2 Termination for Cause. Upon termination for Cause, the Company
shall only be required to pay Employee (i) accrued salary compensation due to
Employee as compensation for services rendered hereunder and not previously
paid; (ii) accrued vacation pay; and (iii) any appropriate business expenses
incurred by Employee in connection with his duties hereunder and approved
pursuant to Section 4 hereof, all through the date of termination. Employee
shall not be entitled to any severance compensation; bonus compensation, whether
"vested" or unvested; or any other compensation, benefits or reimbursement of
any kind.
11.3 Termination for "Good Reason." Employee may terminate this
Agreement for "Good Reason" (as hereinafter defined) upon thirty (30) days
written notice to the Company. The term "Good Reason" means: (i) Employee is not
appointed or is removed from the position of Vice President - Design without
Cause during the term of this Agreement; (ii) Company proposes, or without
Employee's consent makes, a material change in the duties described in Section
1; (iii) Employee, for any reason within the Company's control, is prevented
from or not permitted to perform the duties described in Section 1; or (iv)
Company in any other way breaches this Agreement. The term "Good Reason" does
not include a situation where certain of the duties described in Section 1 are
removed from Employee's responsibility and replaced with other duties which
constitute greater responsibility and/or authority, provided that Company and
Employee agree to the new duties and compensation therefor. Unless Employee
terminates this Agreement within thirty (30) days of learning from any source
that the Company has acted so as to provide "Good Reason" for Employee to
terminate this Agreement and gives thirty (30) days written notice of such
termination, Employee's
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right to receive severance compensation pursuant to paragraph 1.4 for such event
shall be forever lost.
11.4 Severance Compensation. In the event (i) Employee terminates this
Agreement for Good Reason in accordance with Paragraph 11.3 hereof; (ii)
Employee is terminated for any reason (except death or disability) upon, or
within six months following, a "Change in Management or Control (as such term is
defined in Paragraph 11.5 hereof);" (iii) Employee is terminated without Cause;
or (iv) the Company allows this Agreement to expire without renewal, the Company
shall be obligated to pay severance compensation to Employee in an amount equal
to his salary compensation (at the rate payable at the time of such termination)
for a period of the lesser of (i) the remaining portion of the term of this
Agreement, or (ii) nine (9) months from the date of termination; provided,
however, if Employee is employed by a new employer, or as a consultant during
such period, the severance compensation payable to Employee hereunder shall be
reduced by the amount of compensation that Employee actually receives from the
new employer, or as a consultant. However, Employee shall have a duty to inform
the Company that he has obtained such new employment, and the failure to do so
is a material breach of this Agreement. In such event, the Company shall be
entitled to (i) cease all payments to Employee under this Paragraph 11.4; and
(ii) recover any unauthorized payments to Employee in an action for breach of
contract. Notwithstanding anything else in this Agreement to the contrary,
solely in the event of a termination upon or following a Change in Management or
Control, the amount of severance compensation paid to Employee hereunder shall
not include any amount that the Company is prohibited from deducting for federal
income tax purposes by virtue of Section 280G of the Internal Revenue Code of
1986, as amended, or any successor provision. In addition to the foregoing
severance compensation, the Company shall pay Employee (i) all compensation for
services rendered hereunder and not previously paid; (ii) accrued vacation pay;
and (iii) any appropriate business expenses incurred by Employee in connection
with his duties hereunder and approved pursuant to Section 4 hereof; and (iv)
Employee's prorated share of any bonus due pursuant to any bonus plan then in
effect, all through the date of termination. Employee shall not be entitled to
any bonus compensation, whether vested or unvested; or any other compensation,
benefits or reimbursement of any kind.
11.5 Definition of "Change in Management or Control." The term "Change in
Management or Control" means (i) the time that the Company first determines that
any person and all other persons who constitute a group (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934 ("Exchange Act")) have
acquired direct or indirect beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of twenty percent (20%) or more of the Company's
outstanding securities, unless a majority of the "Continuing Directors" (as such
term is hereinafter defined) approves the acquisition not later than ten (10)
business days after the Company makes that determination, or (ii) the first day
on which a majority of the members of the Company's Board of Directors are not
"Continuing Directors." The term "Continuing Directors" means, as of any date of
determination, any member of the Board of Directors of the Company who (i) was a
member of that Board of Directors on the date of this Agreement, (iii) has been
a member of that Board of Directors for the
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two years immediately preceding such date of determination, or (iv) was
nominated for election or elected to the Board of Directors with the affirmative
vote of the greater of (x) a majority of the Continuing Directors who were
members of the Board at the time of such nomination or election, or (y) at least
four Continuing Directors.
11.6 Exclusive Remedy. The payments referred to in this Section 11 shall be
exclusive and shall be the only remedy available to Employee for termination of
his employment with the Company, regardless of the circumstances, reasons or
motivation for any such termination. If Employee gives notice of termination of
this Agreement, or if it becomes known that this Agreement will otherwise
terminate in accordance with its provisions, the Company may, in its sole
discretion, relieve Employee of his duties under this Agreement or assign
Employee other duties and responsibilities to be performed until the termination
becomes effective.
12. Services Unique. It is agreed that the services to be rendered by
Employee hereunder are of a special, unique, unusual, extraordinary and
intellectual character which gives them a peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in an action at law
and that a breach by Employee of any of the provisions contained herein will
cause the Company irreparable injury and damage. Employee expressly agrees that
the Company shall be entitled to injunctive or other equitable relief to prevent
a breach hereof. Resort to any such equitable relief shall not be construed as a
waiver of any of the rights or remedies which the Company may have against
Employee for damages or otherwise.
13. Key Man Life Insurance. During the term of this Agreement, the Company
may at any time effect insurance on Employee's life and/or health in such
amounts and in such form as the Company may in its sole discretion decide.
Employee shall not have any interest in such insurance, but shall, if the
Company requests, submit to such medical examinations, supply such information
and execute such documents as may be required in connection with, or so as to
enable the Company to effect, such insurance.
14. Vacation. Employee shall have the right during each one year period of
the term of this Agreement to take an aggregate of three weeks of vacation, with
pay, at such times as are mutually convenient to Employee and to the Company.
15. Other Benefits.
15.1 Expense Reimbursement for Relocation of Residence. The Company
shall, upon receipt of appropriate documentation from Employee, reimburse
Employee for all actual and reasonable expenses, including closing costs,
incurred by Employee in relocating his residence from Oregon to Southern
California, up to an aggregate of $40,000.00. The Company shall have no
obligation to purchase a new
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residence in Southern California for Employee or contribute to, or reimburse him
for, the purchase price thereof or closing costs associated therewith.
16. Notices. Any and all notices, demands or other communications required
or desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if given by personal delivery, telex,
facsimile, telegram or if deposited in the United States mail, certified or
registered, postage prepaid, return receipt requested. If such notice, demand or
other communication is given by personal delivery, telex, facsimile or telegram,
service shall be conclusively deemed made at the time of such personal service.
If such notice, demand or other communication is given by mail, such notice
shall be conclusively deemed given forty-eight (48) hours after the deposit
thereof in the United States mail addressed to the party to whom such notice,
demand or other communication is to be given as hereinafter set forth:
To the Company: VANS, INC.
15700 Shoemaker Avenue
Santa Fe Springs, California 90670
Attn: General Counsel
562/565-8413 - facsimile
To Employee: MARK SMITH
(at the address set forth below his signature)
Any party hereto may change his or its address for the purpose of receiving
notices, demands and other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
17. Applicable Law and Severability. This Agreement shall, in all respects,
be governed by the laws of the State of California applicable to agreements
executed and to be wholly performed within the State of California. Nothing
contained herein shall be construed so as to require the commission of any act
contrary to law, and wherever there is any conflict between any provision
contained herein and any present or future statute, law, ordinance or regulation
contrary to which the parties have no legal right to contract, the latter shall
prevail but the provision of this Agreement which is affected shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law.
18. Attorneys' Fees. In the event any action is instituted by a party to
enforce any of the terms and provisions contained herein, the prevailing party
in such action shall be entitled to such reasonable attorneys' fees, costs and
expenses as may be fixed by the Court.
19. Modifications or Amendments. No amendment, change or modification of
this Agreement shall be valid unless in writing and signed by all of the parties
hereto. Further, any amendment, change or modification of this Agreement
9
<PAGE> 10
(including but not limited to the at-will nature of this Agreement as set forth
in Section 2 and Paragraph 11.1 hereof) must be approved in advance by the Board
of Directors of Company and reflected in the minutes of such Board's meetings or
in an action by unanimous written consent.
20. Successors and Assigns. All of the terms and provisions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
21. Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement, and any and all prior agreements, understandings or representations
are hereby terminated and canceled in their entirety and are of no further force
or effect. Employee specifically acknowledges and agrees that the Company has
not made any promises, assurances or guarantees regarding his employment or the
Company's business or future prospects, and he has not relied on any such
promises, assurances or guarantees in making his decision to become employed by
the Company and relocate his residence to Southern California.
22. Counterparts. This Agreement may be executed in counterparts.
23. Arbitration of Employment Disputes. Any dispute or controversy arising
out of this Agreement or the employment relationship between Employee and the
Company, including but not limited to, claims by Employee for wrongful
termination, race discrimination, sex discrimination, age discrimination,
discrimination based on nationality or religion, violation of Title VII of the
Civil Rights Act of 1964, as amended, the Americans with Disabilities Act of
1990, the Age Discrimination in Employment Act of 1967, as amended, and the
California Fair Housing and Employment Act, as amended, shall, at any time
following the termination of Employee's employment, be submitted to final and
binding arbitration that shall comply with the applicable arbitration rules of
either the American Arbitration Association or the Judicial Arbitration and
Mediation Service ("JAMS")/Endispute, and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. The cost
of arbitration (except for Employee's attorneys' fees and costs) shall be borne
by the Company. The arbitration shall occur in Los Angeles, California and the
parties hereby consent to the jurisdiction of the arbitrator and to service of
process. The arbitrator shall issue a written opinion regarding his/her
decision. EMPLOYEE HEREBY UNDERSTANDS THAT, BY SIGNING THIS AGREEMENT, HE IS
AGREEING TO HAVE ANY CLAIM HEREUNDER, OR UNDER HIS EMPLOYMENT RELATIONSHIP WITH
THE COMPANY, DECIDED BY NEUTRAL ARBITRATION AND IS GIVING UP THE RIGHT TO A JURY
OR COURT TRIAL. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS PROVISION IS
INTENDED TO AFFECT OR RESTRICT ANY RIGHTS OR REMEDIES EMPLOYEE MIGHT HAVE IF HIS
CLAIMS WERE BROUGHT IN COURT.
24. Survival of Certain Provisions. Sections 7,8,9, and 23 of this
Agreement shall survive the termination hereof.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
EMPLOYEE: THE COMPANY:
VANS, INC.,
a Delaware corporation
/s/ Mark Smith By: /s/ Craig E. Gosselin
- --------------------------- ---------------------------
Mark Smith Craig E. Gosselin
- --------------------------- ------------------------
Address Title
11
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<PERIOD-START> JUN-01-1999
<PERIOD-END> FEB-26-2000
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0
0
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